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How did the recession of 20072009 compargon with new(prenominal) recessions since the bang-up Depression in terms of length? Ans. It was the longest. This may be obturate to a perfect storm situation on top of a real estate bust, and a financial bust crime? , Technology is a big part of the unemployment situation, and then theres the world wide normalizing of salary levels China, India, and so on up, US down. 2. What effect did the recession of 20072009 pass water on government statute? It was greatly increased. 3.What advantages does a sole proprietorship offer? What is a study drawback of this type of organization? A sole proprietorship offers the advantage of relaxation of decision-making and low organizational and operating follows. A major drawback is that there is absolute liability to the owner. 8. Why be institutional investors important in todays task world? Because institutional investors such as pension funds and parcel of landd funds own a large percentage of major U. S. companies, they are having more to say about the way mankindly owned companies are managed.As a group, they have the ability to vote large blocks of copes for the election of a board of directors, which is supposed to run the caller-up in an efficient, competitive manner. The scourge of being able to replace poor performing boards of directors makes institutional investors rather influential. Since these institutions, like pension funds and mutual funds, represent individual workers and investors, they have a responsibility to see that the cockeyed is managed in an efficient and honourable way. 9. Why is profit maximization, by itself, an inappropriate intention?What is meant by the goal of maximization of contributionholder wealth? The problem with a profit maximization goal is that it fails to take account of risk, the timing of the benefits is not considered, and profit step is a very inexact process. The goal of shareholders wealth maximization implies that the firm will attempt to achieve the highest possible total valuation in the grocery store. It is the one overriding objective of the firm and should influence every decision. 10. When does in spite of appearancer transaction occur? What government agency is responsible for protecting against the unethical use of insider trading?Insider trading occurs when anyone with non-public information buys or switchs securities to take advantage of that esoteric information. The Securities and Exchange Commission is responsible for protecting markets against insider trading. In the past mess have gone to jail for trading on non-public information. This has included company officers, investment bankers, printers who have information before it is publishers and even truck drivers who go to bed business magazines and read irresponsible or negative articles about a company before the magazine is on the newsstands and then place trades or have friends place trades based on that infor mation.The SEC has prosecuted anyone who profits from inside information. Every decision 12. What is the resistence in the midst of a primary and a unessential market? A primary market refers to the use of the financial markets to raise new funds for the corpo symmetryn. After the securities are sold to the public (institutions and individuals), they trade in the secondary market between investors. It is in the secondary market that prices are continually changing as investors buy and sell securities based on the expectations of corporate prospects. 13.Assume you are looking at more companies with stir risk which ones will have the highest old-hat prices? Given companies with equal risk, those companies with expectations of high return will have higher third estate transmission line prices relative to those companies with expectations of poor returns. Chapter 2 1. Discuss some financial variables that affect the price- cabbage ratio. The price-earnings ratio will be influ enced by the earnings and sales growing of the firm, the risk or volatility in performance, the debt-equity structure of the firm, the dividend payment policy, the theatrical role of management, and a number of other factors.The ratio tends to be future-oriented, and the more positive the outlook, the higher it will be. 2. What is the difference between book value per share of common stock and market value per share? Why does this discrepancy occur? Book value per share is arrived at by winning the cost of the assets and subtracting out liabilities and preferred stock and dividing by the number of common shares outstanding. It is based on the historical cost of the assets. Market value per share is based on current assessed value of the firm in the marketplace and may bear little relationship to original cost.Besides the disparity between book and market value caused by the historical cost approach, other contributing factors are the growth prospects for the firm, the quality of management, and the industry outlook. To the extent, these are kinda negative or positive market value may differ widely from book value. 5. How is the income statement related to the balance mainsheet? The earnings (less dividends) reported in the income statement is transferred to the self-control section of the balance sheet as retained earnings.Thus, what we earn in the income statement becomes part of the ownership interest in the balance sheet. 6. Comment on why pomposity may restrict the usefulness of the balance sheet as usually presented. The balance sheet is based on historical costs. When prices are arise rapidly, historical cost data may lose much of their significanceparticularly for plant and equipment and inventory. 10. Why is interest get down said to cost the firm substantially less than the actual write down, season dividends cost it ascorbic acid percent of the outlay?Interest expense is a tax-deductible item to the corporation, while dividend payments are not. The net cost to the corporation of interest expense is the measuring rod paid multiplied by the difference of one minus the relevant tax rate. For example, $ snow of interest expense costs the company $65 afterward taxes when the corporate tax rate is 35 percent for example, $100 ? (1 . 35) = $65. Problems Q5. Sales - woo of goods sold Gross profit -Selling and administrative expense -Depreciation expense Operating profit -Interest expense earnings before taxes Taxes Earnings after taxes - preferred stock dividends Earnings available to common stockholders Shares outstanding Earnings per share Q11. Stein Books, Inc. Income Statement For the year ended Dec. 31 2010 Sales$273,000 Cost of goods sold$210,000 Gross profit= 63,000 S&A expenses -12,000 Depreciation expense -15,000 Operating profit =36,000 Interest Expense -10,000 Earnings before taxes = 26,000 Taxes -7,800 Earnings after taxes = 18,200 Q18. (a) Compute earnings per share and the P/E ratio for 2009.The P/E ra tio equals the stock price divided by the earnings per share. 280,000 / 200,000 = $1. 40 EPS 30. 80 / 1. 40 = 22 P/E ratio (b) Compute earnings per share and the P/E ratio for 2010. 320,000 /200,000 = $1. 60 EPS 40 / 1. 60 = 25 P/E ratio (c) Give a general history of why the P/E ratio changed. The market price of the stock increased at a higher rate than earnings. Second part From the problem above, assume for botulinum toxin A Facial Care that in 2011, Earnings after taxes declined to $140,000 with the same $200,000 shares outstanding. The stock price declined to $24. 50. a.Compute earnings per share and the P/E ratio for 2011. 140,000 / 200,000 = $0. 70 EPS 24. 50 / 0. 70 = 35 b. Give a general explanation of why the P/E changed. Earnings decreased at a higher rate than the market price of the stock. Q. 23. Landers Nursery and Garden Stores accepted assets$220,000 Capital/Fixed assets $170,000 Total assets $390,000 Current liabilities $80,000 Long-term liabilities 140,000 Shar eholders equity 170,000 Preferred stock obligation 40,000 Net worth assigned to common 130,000 honey oil shares outstanding 25,000 Book value (net worth) per share $5. 20