The financial markets usually use the past year's return on equity as the main way to judge strategic performance because option b. ROE is really constrained by the long term asset and equity positions of a company, and therefore won't vary that much from period to period.
<h3>What is Return on Equity (ROE)?</h3>
Return on Equity (ROE) is known to be that which is often used to measures the net profits gotten by a firm based on each dollar of equity investment that is also been contributed by shareholders.
Note that this is one that tends to be expressed in percentage form and thus, The financial markets usually use the past year's return on equity as the main way to judge strategic performance because option b. ROE is really constrained by the long term asset and equity positions of a company, and therefore won't vary that much from period to period.
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See options below
a. CEO decisions can dramatically improve ROE in the short run.
b. ROE is really constrained by the long term asset and equity positions of a company, and therefore won't vary that much from period to period
c. ROE is only relevant to shareholders, and is not meaningful to those who own a company's bonds
Answer and Explanation:
The Journal entry is shown below:-
Bonds payable Dr, $1,800,000
(1,800 × $1,000)
To Discount on bonds payable $30,000
To Common stock $720,000
(1,800 × 40 × $10)
To Paid-in-capital in excess of par $1,050,000
(Being conversion of bond into common stock is recorded)
Therefore for recording the conversion using the book value approach we simply debited the bonds payable and credited the discount on bonds payable, common stock and paid-in-capital in excess of par.
Answer:
The firm will use labor intensive technology when the marginal product of using labor intensive technology is greater than the marginal produce of capital intensive technology
Explanation:
Marginal product is the change in total product when the amount of input used in changed by 1 unit
When choosing which form of technology to use, a firm would choose the technology that yields the highest marginal product
For example, imagine a firm can choose between using labour or capital in its production. When labour is increased frim 10 to 20 units, output increase from 100 to 500 units
when capital is increased frim 10 to 20 units, output increase from 100 to 200 units
Marginal product of labour = 500 - 100 / ( 20 - 10) = 40
Marginal product of capital = (200 - 100) / (20 - 10) = 20
Marginal product of labour is higher than the Marginal product of capital. the firm should be labour intensive
Answer:
Expected Return = 10.80%
Standard Deviation = 19.72%
Explanation:
Amount invested in Standard & Poor’s Depository Receipts = 60%
Expected return of Standard & Poor’s Depository Receipts = 10%
standard deviation of Standard & Poor’s Depository Receipts = 20%
Amount invested in MSCI EAFE Index Fund = 40%
Expected return of MSCI EAFE Index Fund = 12%
Standard deviation of MSCI EAFE Index Fund = 30%
Correlation between the two investments = 35%
Now,
Expected Return = ∑(Amount invested × Expected rate of return)
= 0.60 × 0.10 + 0.40 × 0.12
or
= 10.80%
Standard Deviation = √(∑(Amount invested × Standard deviation))²
= √[(0.60)²(0.20)² + (0.40)²(0.30)² + 2(0.60)(0.40)(0.20)(030)(0.35)]
or
Standard Deviation = 19.72%
<span>Heavy speculation is a bad idea in any market since it has a tendency to inflate prices to unrealistic levels. That is basically what many investors prior to the Great Depression did when they thought the market would keep going higher and higher. They borrowed money, sold their houses, etc.. to buy into the stock market thanks to that kind of speculation without even considering the underlying reasons for why the market is there in the first place.</span>