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Varvara68 [4.7K]
3 years ago
11

Bankston Corporation forecasts that if all of its existing financial policies are followed, its proposed capital budget would be

so large that it would have to issue new common stock. Since new stock has a higher cost than retained earnings, Bankston would like to avoid issuing new stock. Which of the following actions would REDUCE its need to issue new common stock?
A. Increase the proposed capital budget.
B. Reduce the amount of short-term bank debt in order to increase the current ratio.
C. Increase the dividend payout ratio for the upcoming year.
D. Reduce the percentage of debt in the target capital structure.
E. Increase the percentage of debt in the target capital structure.
Business
1 answer:
Reil [10]3 years ago
6 0

Answer:<em> Option (E) is correct.</em>

From the given option, the following will reduce Bankston's need to issue new common stock: <em>Increase the percentage of debt in the target capital structure.</em>

With an increase in percentage of debt , there will be a proportional increase in cost of equity and thereby decreasing investment in equity. This will therefore reduce Bankston's need to issue new common stock

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Answer:

The correct answer is false.

Explanation:

A firm incurs both variable cost and fixed cost in the short run. If the firm is able to cover the variable cost in the short run it will continue operating. However, if it is not able to cover its variable cost it will stop operating.  

So, if the demand falls such that total revenue is not able to cover total cost but the variable cost is being covered, the firm will not stop production.  

In the long run, all the costs are variable. So when the revenue is not able to cover cost, the firms will stop operating.

6 0
3 years ago
Jaguar has full manufacturing costs of their Sminustype sedan of pound​22,803. They sell the Sminustype in the UK with a​ 20% ma
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Answer:

Explanation:

Old Price         27363

Exchange Rate 2.01

USD Value         55000

the company has committed to sale at $55000 existing price for next six months.

No currency hedge contract has been made by jaguar, in such case due to appreciation of pound the value of dollar will decrease but due to commitment by jaguar not to fluctuate the cost the total amount receivable in pounds will decrease as compared to 6 months before

USD Value         55000

Exchange Rate  2.15

Price in Pounds      25581

Decrease in pounds = 27363-25581 = 1782 loss

3 0
3 years ago
Read 2 more answers
Three categories of activities (operating, investing, and financing) generate or use the cash flow in a company. In the followin
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Answer:

1. a. A company records a loss of $70,000 on the sale of its outdated inventory. OPERATING ACTIVITY.

Operating activities have to do with the day to day operations of the business.

b. D and W Co. sells its last season's inventory to a discount store. OPERATING ACTIVITY.

This is also a day-to-day operation of the business so it falls under operating activities.

c. DigiIink Printing co. buys new machinery to ramp up its production capacity.  INVESTING ACTIVITY.

Investing activities have to do with the purchase and sale of capital assets such as financial assets in other companies or fixed assets. The machinery purchased here is a fixed asset so this will count as an investing activity.

d. Yum Brands distributes dividends to its common stockholders for the first. FINANCING ACTIVITY.

Financing activities have to do with the long term debt and equity of a company and this includes dividends so this falls under her.

2. Cashflow due to financing activities:

Cash Balance second year =  Cash Balance first year + Cash Flows From Operating Activities + Cash Flows From Investing Activities + Cash Flows From Financing Activities

280 = 180 + 1,053 - 576 + Financing activities

280 = 657 + Financing activities

Financing cashflow = 280 - 657

= -$377 million

6 0
3 years ago
This occurs when one party repeatedly holds out for a better deal.
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A breakdown in bargaining happens when one party repeatedly holds our for a better deal. In this cases, private solutions to this kind of externalities is deemed necessary. Though bargaining is quite common among transactions made by economists, it cannot be helped that there are certain problems that arise from this.
8 0
3 years ago
Snow Cap Company has a unit selling price of $250, variable costs per unit of $170, and fixed costs of $160,000. Compute the bre
snow_tiger [21]

The break-even point in units using the mathematical equation  is 2,000 in units and the unit contribution margin is 80 per unit.

<h3>Break even points in units</h3>

a. Break-even point in unit

Using this formula

Break-even point in unit=Fixed cost/(Selling price-Variable cost)

TC = FC + VC

Sales - TC = Net Income

Sales - TC = 0

Sales - FC - VC = 0

2500(Q)-160,000-170(Q) = 0

80(Q)-160,000 = 0

80(Q)=160,000

Q=160,000/80

Q=2,000 break-even in units

b. Unit contribution margin

Unit contribution margin = Selling price- Variable cost

Unit contribution margin= $250 - $170

Unit contribution margin =$80 per unit

Inconclusion the break-even point in units using the mathematical equation  is 2,000 in units and the unit contribution margin is 80 per unit.

Learn more about break-even point here:brainly.com/question/9212451

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