Question 1

Suppose that a firm has a price-earnings ratio which is higher than a value deemed to be normal. Investors tend to infer from th

Dmitrij [34]

Answer:

(C) The Firm's stock is overvalued and one should consider selling the stock

Explanation:

Price Earnings Ratio is a measure of market price of stock in relation to it's earnings. It shows how well a company's stock is valued in the market.

Price Earnings Ratio = $\frac{Market\ Price\ Per\ Share}{Earnings\ Per\ Share}$

A high price earnings ratio would lead investors to believe that the firm's stock prices are higher than it's earnings which means the stock prices are overvalued.

This further means, the market price of those stocks is greater than their fair value and it would be beneficial to investors to sell such stocks as it would result into a gain.

Thus, a higher price earnings ratio will lead investors to infer that the firm's stock is overvalued and one should consider selling the stock.

8 0

3 years ago

Ivanhoe Company sublet a portion of its warehouse for five years at an annual rental of $71100, beginning on May 1, 2020. The te

Olenka [21]

Answer and Explanation:

The adjustment should be as follows

Unearned Rent Revenue $47,400

To Rent Revenue $47,400

(Being recording of revenue earned is recorded)

Here unearned rent revenue is debited as it decreased the liabilities and the rent revenue is credited as it increased the revenue. Also liabilities and revenue contains the normal debit balance

The working is shown below:

= $71,100 × 8 months ÷ 12 months

= $47,400

The eight months are calculated from May 1 to December 31

8 0

3 years ago

Windsor, Inc. sells merchandise on account for $3700 to Morton Company with credit terms of 2/10, n/30. Morton Company returns $

IrinaK [193]

Answer:

Dr. Cash $2,842

Dr. Discount Expense $58

Cr. Account Receivable $2,900

Explanation:

Terms 2/10, n/30 means there is a discount of 2% is available on payment of due amount within discount period of 10 days after sale with net credit period of 30 days.

Sales = $3,700

Returns = $800

Amount Due = $3,700 - $800 = $2,900

As the payment is made within discount period, so discount will be availed

Discount = $2,900 x 2% = $58

Cash Paid = $2,900 - $58 = $2,842

7 0

3 years ago

The following data is available for Sampson Corporation. Sampson Corporation Accounts Item Amount Net income $200,000 Depreciati

frosja888 [35]

Answer:

cash flow provided by operation 260,000

Explanation:

net income 200,000

adjustment for non-monetary terms: (A)

depreciation expense 60,000

loss on sale of land 15,000

adjusted net income 275,000

Change in working capital:

decrease in AR 30,000

Decrease in AP (45,000) (B)

net change in WC: (15,000) (C)

cash flow provided by operation 260,000

(A) we must focus on cahs movement so the depreciation and loss on sale which are non-mentary term. This are not related to cash

(B) the decrease in account receivable means we colelct from our customer more.

(C) the decrease in accounts payable represent we use more cash to pay up the suppliers

4 0

4 years ago

Which type of economy features a direct exchanges of goods or services without the use of money?

gayaneshka [121]

The answer is BARTER or TRADE

7 0

4 years ago

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