Business/Professional Ethics Directors/Executives/Acct
8th Edition
ISBN: 9781337485913
Author: BROOKS
Publisher: Cengage
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Discuss why General Motors’ stockholders probably didn’t suffer as a result of the reported loss. What do you think was the basis for our conclusion?
You observed that high-level managers make superior returns on investments in their company’s stock. Would this be a violation of weak-form market efficiency? Would it be a violation of strong-form market efficiency?
What are some of the risks an investor would face when investing in a stock? In addition to the business risk coming from the type of business environment that your company operates in, what additional risk would be of concern to an investor?
The company might be mismanaged and do poorly or go out of business.
The company's stock market return might be wildly unpredictable as the operating performance might be unstable.
The company's competitors might do a better job and take market share away?
The list goes on and on...
What risks would you face if you bought 100 shares of Tesla?
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- What is the value of Ls stock for volatilities between 0.20 and 0.95? What incentives might the manager of L have if she understands this relationship? What might debtholders do in response?arrow_forwardWrite a brief description of the logic behind the development of the time value formula for annuities. Why does stock-based compensation create a moral hazard for executives?arrow_forwardIf you are in financial hardship, explain what it means. If we suppose that financial hardship occurs, explain how and why financial distress would make a company's stock more hazardous.arrow_forward
- Explain in full detail why the following statement is false: "Financial managers should not focus on the present stock value of the company. Instead, they should focus on the profitability of the company. Doing so will result in increasing the value of the stock.arrow_forward“When the stock market declines the net worth of companies decreases, causing the problem of asymmetric information to decrease as well.” Is this statement true, false, or uncertain? Explain your answer.arrow_forwardWhy do share values fall and stock market experiences a decline when something goes wrong in the political setting of a country?arrow_forward
- To what extent do you feel the company’s dividend policies support or hinder their strategies? For example, if the company is attempting to grow, are they retaining and reinvesting their earnings rather than distributing them to investors through dividends? Be sure to substantiate your claims.arrow_forwardWhy might a company repurchase its own stock? A) It believes that the market undervalues its shares B) To offset dilutive effects of employee stock options granted C) To recognize an economic gain when the treasury shares are later sold for a profit D) To improve earnings per share by reducing the denominator E) All of the above is it just A and B or is it all of the abovearrow_forwardWhat does it mean to say that managers should maximize shareholders' wealth "subject to ethical constraints"? What ethical considerations might factor into decisions that result in lower cash flow and stock price effects than they might have otherwise been valued?arrow_forward
- Which of the following sources of market inefficiency would be most easily exploited?a. A stock price drops suddenly due to a large sale by an institution.b. A stock is overpriced because traders are restricted from short sales.c. Stocks are overvalued because investors are exuberant over increased productivity in the economy.arrow_forwardWhat were the direct and indirect costs of the LIBOR scandal for Barclays? Are these costs only a part of the reality for investment banks and a necessary risk to produce the profits required by their shareholders ?arrow_forwardExplain how managers should not focus on the current stock value because doing so will lead to an overemphasis on short-term profits at the expense of long-term profits.arrow_forward
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