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Answer:
Option (d) 7 times
Explanation:
Data provided in the question:
Net income = $250,000
Dividends paid to common stockholders = $50,000
Common stock outstanding = 50,000
Selling price of the common stocks = $35
Now,
The price-earnings ratio is calculated as:
⇒ ( Stock price ) ÷ ( Earnings per share )
also,
Earnings per share = ( Net income ) ÷ ( common stock outstanding )
= $250,000 ÷ 50,000
= $5
or
Price-earnings ratio = $35 ÷ $5
or
Price-earnings ratio = 7 times
Option (d) 7 times
Answer and Explanation:
a. The computation of price (expressed as a percentage of the face value) is shown below:-
Price = Face value ÷ (1 + Yield to maturity)^Number of the compounding period
= $1,000 ÷ (1 + 0.0323)^1
= $1,000 ÷ 1.0323
= $968.71
Price expected as a percentage to a face value = Price ÷ Face value × 100
= $968.71 ÷ $1,000 × 100
= 96.87%
b. The computation of credit spread of AAA-rated corporate bonds is shown below:-
Credit spread = Yield of AAA-rated corporate bond - Yield of treasury bond
= 3.23% - 3.15%
= 0.08%
c. The computation of credit spread on B-rated corporate bonds is shown below:-
Credit spread = Yield of B-rated corporate bond - Yeld of treasury bond
= 4.94% - 3.15%
= 1.79%
d. The credit rating for a bond changes with its respective credit risk change. That implies the bond 's rating would be lower the lower risk, and likewise.
The investor is demanding higher returns on risky bonds for additional risk-taking. Hence the credit spread is widening as the rating of bonds falls with an increase in the risk.
Answer:
The answer is relevance and faithful representation.
Explanation:
Accounting information that is not relevant useful.
Relevance is when the accounting information in timely and use for taking major business and economic decisions.
Another one is faithful representation. Accounting information must be faithfully represented. It must be objective and free from bias.
If Accouting information is to be faithfully represented, it must have the following:
1. Completeness. There must be full disclosure of information. No material item or information must be omitted.
2. Error-free It must be 99percent error free.
3. It must be free from bias. Objectivity is the key.
Answer: assumed converted only if they are dilutive.
Explanation:
Diluted Earnings per Share is a calculation that is used to determine the quality of the earnings per share if a company when all the convertible securities are taken into consideration.
It should be noted that convertible securities are the outstanding stock options, convertible preferred shares, warrants and convertible debentures. During computation, the convertible bonds will be treated to be assumed converted only if they are dilutive.
