please answer question 18 and 19 and 20 and 21 please answer the 4 questions not

Question

please answer question 18 and 19 and 20 and 21
please answer the 4 questions not just one question

18. Risk in financial decision making is best interpre ted as a. probability of a loss b. the expected value c. uncertainty d. the payback period 19. Wh ich of policy? the following would be consistent with an aggressive working capital a. Using more long-term financing and more short-term financing b. Using more short-term financing and less long-term financing. c. Using more temporary assets and more long-term financing d. Using less short-term financing and more current assets 20. The type of ratio which measures a company's overall performance are the a. profitability ratios b. liquidity ratios c. debt management ratios d. asset management ratios 21. "Pro Forma" financial statements are a. using percentages rather than dollars b. audited financial statements statements c. the quarterly financial statements submitted to stockholders d. forecasted financial statements 22. The optimal capital structure for a company is the one which has the a. highest cost of capital b. lowest beta c. lowest cost of capital d. highest cost of equity 23. A company which pays out the same percentage of their profits as dividends every year is following a a. constant payout ratio b. small regular dividend plus "extras" policy C. stock dividend d. stable dollar payout

Explanation / Answer

18. Uncertainty

Risk represents The possibility of a gain also due to the financial decisions made. Expected value refers to the expected returns from the financial decisions and not risk. Payback period refers to the duration required to recover the initial investment. Risk represents uncertainty sense it is a consequence of action taken in spite of the uncertainty. If an action is taken where there is no uncertainty it will not be a risk

19. Using more short-term financing and less long term financing

Aggressive working capital policy is a high risk strategy in which short-term financing is used to finance both current assets and long term assets. Hence there is excessive use of short-term financing.

Using more long term financing will reduce risk hence option a and c are incorrect. Option d is incorrect since using less short term financing again implies use of more long term financing.

20. Asset Management ratio

Profitability ratios measure only the profits of the business. Liquidity ratios measure the ability of the business to meet its immediate obligations. Debt management ratios refer to capital structure ratios. The overall performance is measured by Asset Management ratios since they measure how efficiently a business is able to utilise its assets. So high ratio indicates that the business is able to generate a large amount of sales from a small asset base.

21. Forecasted financial statements

Pro forma financial statements are prepared in advance so as to Garner an estimate of the future performance of the business. Financial statements in which percentages are used is called a common size statement. Option B is incorrect since audited financial statements are not proforma and option C is also incorrect since they are not submitted to stockholders

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