Which practice is considered unlawful?

Regarding the direct and indirect methods of preparing the statement of cash flows, which of the following statements is true?

Anastaziya [24]

Answer:

B. The indirect method starts with net income and adjusts it to net cash provided by (used for) operating activities.

Explanation:

The cash flow statement shows the entire cash flow for the period in consideration, generally a financial year.

This statement is divided in three parts: Operating, Investing and Financing.

There are two methods to prepare the cash flow statement: Direct Method and Indirect Method.

There is no difference in reporting investing and financing activity, whereas the operating activities are reported in different manners.

Under indirect method, the net income is adjusted to calculate the operating cash flow, all the transactions which are non cash or do not relate to operating activities.

Thus, statement B is correct.

3 0

3 years ago

There is a 60 percent chance of low demand and a 40 percent chance of high demand. The corresponding (inverse) demand functions

Burka [1]

Answer:

New houses build =200

Profit =$13,860,000

Explanation:

In this particular question there are 2 scenarios for demand function,

i.e. (a.) 60 percent chance of low demand, $P_{60} = 300,000-400Q$

(b.) 40 percent chance of high demand, $P_{40} = 500,000-275Q$

∴ Expected demand function = 60%×(300000-400Q) + 40%×(500000-275Q)

= 380,000-350Q

$P_{D}$ =380000-350Q

Revenue = (380000 - 350Q)×Q = 380000Q - 350 $Q^{2}$

Here, the no. of new homes build will depend on maximizing profit

∵ Profit = Revenue - Cost

π = (380000 - 350Q)×Q - (140000+240000Q)

π = 380000Q - 350 $Q^{2}$ - (140000+240000Q)

In order to maximize profit , we will

$\frac{\delta P_{\pi}}{\delta Q}$ = 0

$\frac{\delta P_{\pi}}{\delta Q}$ = 380000-350*2*Q-240000

∴ 380000-350×2×(Q-240000) =0

Q=200

So number of houses that they should build =200

π = 380000Q - 350 $Q^{2}$ - (140000+240000Q)

π = 380000-(350× $200^{2}$ ) - (140000+(240000*200))

π =$13,860,000

New houses to be build =200

Profit =$13,860,000

8 0

3 years ago

Dearborn Company has earnings per share of $2.80, it paid a dividend of $2.10 per share, and the market price of the company's s

marissa [1.9K]

Answer:

The price/earnings ratio is closest to 21.79

Explanation:

Price / Earning ratio is used to assess the owner`s appraisal of share value. The higher the ratio the more confident that the shareholders have on company's future performance.

Price / Earning ratio = Market price of Share ÷ Earnings per share

= $61 ÷ $2.80

= 21.79

6 0

3 years ago

Jen's Fashions is growing quickly. Dividends are expected to grow at a 19 percent rate for the next 3 years, with the growth rat

Sedaia [141]

Answer:

Ans. Current Share Price=$33.85

Explanation:

Hi, we first have to establish the dividend for the first 3 years and the dividend when the growth rate falls off to a constant rate of 8% with the formula to find the present value of a perpetuity with constant growth rate. From there, we need to bring all the above cash flows to present value and that is the price of the share. The formula is as follows.

$Price=\frac{D1}{(1+r)^{1}}+\frac{D2}{(1+r)^{2} } +\frac{D3}{(1+r)^{3} } +\frac{D3(1+g)}{(r-g)} \frac{1}{(1+r)^{3} }$

To find D1, D2,and D3, we have to do this.

D1=Do(1+0.19)

D2=D1(1+0.19)

D3=D2(1+0.19)

Since 0.19 is the growth rate for 3 years. Everything should look like this

$Price=\frac{4.04}{(1+0.12)^{1}}+\frac{4.29}{(1+0.12)^{2} } +\frac{25.52}{(1+0.12)^{3} } +\frac{25.52(1-0.08)}{(0.12+0.08)} \frac{1}{(1+0.12)^{3} } =33.85$

notice that the sign of the last part do not coincide with the formula, that is because the growth rate from the first 3 years is -8%.

Best of luck.

7 0

4 years ago

Your investment has a 20% chance of earning a 30% rate of return, a 50% chance of earning a 10% rate of return, and a 30% chance

stellarik [79]

Answer:

9.2%

Explanation:

expected return of the investment = potential return x chance of each return happening

Expected return of the investment:

20% chance of occurring x 30% potential return = 0.2 x 30% = 6%
50% chance of occurring x 10% potential return = 0.5 x 10% = 5%

30% chance of occurring x -6% potential return = 0.3 x -6% = -1.8%
total expected return = 9.2%

6 0

3 years ago