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Crazy boy [7]
3 years ago
15

The free cash flow hypothesis states:

Business
1 answer:
tresset_1 [31]3 years ago
8 0

Answer:

C. that issuing debt requires interest and principal payments to be paid thereby reducing the potential of management to waste resources.

Explanation:

Free Cash Flow is the cash generated by an organisationafter it has accounted for the outflows to capital assets maintenance costs and operating activities. Free Cash flow is a measure of a company's profitability after non-cash expenses in the account statement have been deducted. It is the cash flow an organisation has when it has limited or no debt obligations in its portfolio

The Hypothesis of free cash flow states that an organisation with a large amount of free cash will display less financial or spending discipline compared with an organisation that has debts obligations to spend cash on.

Based on the hypothesis, it becomes essential for such organisations to issue debts so that as the legal obligations (debts, principal and interest) increases, the potential to waste money as a result of fre cash flow reduces.  

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In gathering audit evidence, the accessibility of information may be a factor thereby influencing which judgment trigger
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2 years ago
On January 1, 2019, Amazon issues $100,000 in bonds having a stated rate of 10%. The bonds mature in 2 years (Dec. 31, 2020) and
Nutka1998 [239]

Answer:

cash                   96,535 debit

discount on BP    3,465 debit

          Bonds Payable          100,000 credit

Explanation:

We need to determinate the price at which the bonds were issued:

Which is the present value of the coupon payment and maturity

C \times \frac{1-(1+r)^{-time} }{rate} = PV\\  

Coupon payment: 100,000 x 10% / 2 = 5,000

time 4  (2 years x 2 payment per year)

rate 0.06  (12% annual / 2 = 6% semiannual)

5000 \times \frac{1-(1+0.06)^{-4} }{0.06} = PV\\  

PV $17,325.5281  

 

\frac{Maturity}{(1 + rate)^{time} } = PV  

Maturity (face value)   $100,000.00  

time   4.00  

rate  0.06

\frac{100000}{(1 + 0.06)^{4} } = PV  

PV   79,209.37  

 

PV c $17,325.5281  

PV m  $79,209.3663  

Total $96,534.8944  

As the bonds are issued below face value there is a discount:

100,000 - 96,535 = 3,465

the entry will recognize the cash procceds and the creation of a liaiblity

we will also use an auxiliar account for the discount on the bonds

7 0
4 years ago
Suppose the revenue from producing​ (and selling) x units of a product is given by Upper R (x )equals 10 x minus . 04 x squared
Volgvan

Answer:

marginal revenue is -6

and production levels 200, 50  

Explanation:

given data

R(x) = 10 x - 0.04 x²  

solution

we have given

R(x) = 10 x - 0.04 x²  

so here R'(x)  is

R'(x) = 10(1) - 0.4 (2x)  

R'(x) = 10 - 0.8 x ....................1

so here at x is 20 marginal revenue will be

R'(20) = 10 - 0.8(20)

R'(20) =  10 - 16

R'(20) = - 6

and

when revenue  is ​$400

R(x) = 400

400 = 10 x - 0.04 x²  

x= 200, 50

7 0
4 years ago
What is the principle of quality? What is the principle of quantity? Give an example in which a physical activity professional w
QveST [7]

Answer:

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Explanation:

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3 years ago
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