Financial Management - Study Mode

[#321] Cost of retained earnings is equal to _______.
Correct Answer

(A) Cost of equity

Explanation

Solution: Cost of retained earnings is equal to Cost of equity. The cost of retained earnings is the earnings foregone by the shareholders. In other words, the opportunity cost of retained earnings may be taken as the cost of retained earnings.

[#322] Beta measures the ________.
Correct Answer

(C) Market risk

Explanation

Solution: Beta is a measure of the volatility, or systematic risk, of a security or a portfolio in comparison to the market as a whole. Beta is used in the capital asset pricing model (CAPM), which calculates the expected return of an asset based on its beta and expected market returns.

[#323] Operating incomes and the discount rate of a particular risk class are the 2 factors determining ____________.
Correct Answer

(D) Independence hypothesis

Explanation

Solution: Operating incomes and the discount rate of a particular risk class are the 2 factors determining Independence hypothesis. The Independence hypothesis is a proposed solution to the synoptic problem. It holds that Matthew, Mark, and Luke are each original compositions formed independently of each other, with no documentary relationship.

[#324] The largest single institutional owner of common stocks is________.
Correct Answer

(A) mutual funds

Explanation

Solution: The largest single institutional owner of common stocks is mutual funds. Mutual fund is an entity that pools money of large number of investors to invest in different securities.

[#325] EBIT is usually the same thing as.
Correct Answer

(D) operating profit

Explanation

Solution: EBIT is usually the same thing as operating profit. Earnings before interest and taxes (EBIT) is a company's net income before income tax expense and interest expense have been deducted. EBIT is used to analyze the performance of a company's core operations without tax expenses and the costs of the capital structure influencing profit.