Equity valuation is a financial technique used to estimate the fair value of a company's stock or equity. It is a fundamental approach used to determine the intrinsic value of a company's shares for investment decisions. The following are some of the uses of equity valuation in practice:
Fundamental analysis: Equity valuation can be used to assess the intrinsic worth of a company, its financial position, revenue potential, and future growth prospects. It aids investors in making informed investment choices. Merger and acquisition: Equity valuation is used to determine the fair value of a company during the M&A process. This helps in deciding the cost of acquiring a company or whether to invest in it.
Financial reporting: Equity valuation is an important aspect of financial reporting as it can aid in determining the fair value of the company's equity or shares, which can be used to report financial statements. Shareholder value creation: Equity valuation can be used by managers to increase shareholder value by making strategic business decisions, including investments, acquisitions, and divestitures.
Portfolio management: Equity valuation is used by portfolio managers to make investment decisions based on a company's fundamentals, market performance, and industry outlook. They use this information to construct a well-diversified portfolio.
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Spar Company has calculated the following ratios for one of its investment centers: Margin............. 25% Turnover... .......... 0.5 times What is Spar's return on investment for this investment cen
Spar Company has calculated the Margin and Turnover ratios for one of its investment centers. The Margin ratio is 25%, and the Turnover ratio is 0.5 times. The Return on Investment (ROI) of this investment center can be determined by multiplying the Margin and Turnover ratios.
Let us calculate the ROI for Spar's investment center using the given formula: ROI = Margin × Turnover.ROI = 0.25 × 0.5ROI = 0.125 or 12.5%
Therefore, Spar Company's return on investment for this investment center is 12.5%.
This indicates that for every dollar invested in this investment center, the company is earning a return of 12.5 cents. The higher the ROI, the more efficient the investment center is in generating profits. The ROI of 12.5% is a good ROI, but it depends on the company's standards and expectations. If Spar Company has set higher standards for ROI, then this investment center's ROI is considered below par, and the company needs to take corrective actions.
Therefore, Spar Company has calculated the Margin and Turnover ratios for one of its investment centers. The Margin ratio is 25%, and the Turnover ratio is 0.5 times.
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Mazie Supply Co. uses the percent of accounts receivable method. On December 31, it has outstanding accounts receivable of $55,000, and it estimates that 2% will be uncollectible. Prepare the year-end adjusting entry to record bad debts expense under the assumption that the Allowance for Doubtful Accounts has: (a) a $415 credit balance before the adjustment. (b) a $291 debit balance before the adjustment.
View transaction list Journal entry worksheet Prepare the year-end adjusting entry to record bad debts expense under the assumption that the Allowance for Doubtful Accounts has a $415 credit balance before the adjustment. Note: Enter debits before credits. Transaction (a)=
General Journal=
Debit =
Credit =
The adjustment entry involves increasing the allowance to reflect the estimated bad debts expense. In this case, the estimated bad debts expense is 2% of the outstanding accounts receivable.
a) Transaction (a):
General Journal
Debit: Bad Debts Expense $1,030
Credit: Allowance for Doubtful Accounts $1,030
Explanation:
Since the Allowance for Doubtful Accounts has a $415 credit balance before the adjustment and the company estimates that 2% of the outstanding accounts receivable will be uncollectible, we need to adjust the allowance by the estimated amount.
The adjustment entry involves increasing the allowance to reflect the estimated bad debts expense. In this case, the estimated bad debts expense is 2% of the outstanding accounts receivable.
2% of $55,000 = $1,100
However, since the Allowance for Doubtful Accounts has a credit balance of $415, we only need to increase it by the net amount.
$1,100 - $415 = $685
To record this adjustment:
Debit the Bad Debts Expense account for $1,030 to increase the expense.
Credit the Allowance for Doubtful Accounts account for $1,030 to increase the allowance.
Please note that the amounts in the adjusting entry are derived based on the information provided in the question and the assumption that the allowance account balance before the adjustment is $415 credit.
b) Transaction (b):
General Journal
Debit: Allowance for Doubtful Accounts $1,100
Credit: Bad Debts Expense $1,100
Explanation:
Since the Allowance for Doubtful Accounts has a $291 debit balance before the adjustment, we need to adjust the allowance to reflect the estimated bad debts expense. The estimated bad debts expense is 2% of the outstanding accounts receivable, which is calculated as follows:
2% of $55,000 = $1,100
To record this adjustment:
Debit the Allowance for Doubtful Accounts account for $1,100 to increase the allowance.
Credit the Bad Debts Expense account for $1,100 to record the expense.
Please note that the amounts in the adjusting entry are derived based on the information provided in the question and the assumption that the allowance account balance before the adjustment is $291 debit.
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Define law of demand and Law of supply List one price factor and 3 non-price factors that affect the demand for the goods and services with examples.
The law of demand states that, ceteris paribus (all other factors remaining constant), there is an inverse relationship between the price of a good or service and the quantity demanded. In other words, as the price of a product increases, the quantity demanded decreases, and vice versa.
The law of supply, on the other hand, states that, ceteris paribus, there is a direct relationship between the price of a good or service and the quantity supplied. As the price of a product increases, the quantity supplied also increases, and vice versa.
Price factor affecting demand:
Price of the product: Changes in the price of a product directly impact its demand. When the price of a product decreases, the demand for that product generally increases, and when the price increases, the demand decreases.
Non-price factors affecting demand (examples):
Consumer income: The income of consumers is a crucial factor that affects the demand for goods and services. Higher income levels often lead to increased purchasing power and a greater demand for various products. For example, if individuals experience an increase in their disposable income, they may be more willing to purchase luxury goods or engage in leisure activities.
Consumer preferences and tastes: Consumer preferences and tastes play a significant role in shaping the demand for goods and services. Changes in trends, fashion, and consumer preferences can lead to shifts in demand. For example, a growing preference for healthier food options may increase the demand for organic or plant-based food products.
Availability of substitutes: The availability of substitutes impacts the demand for a particular product. When more substitutes are available, consumers have more options to choose from, which can influence their purchasing decisions. For instance, if the price of a particular brand of cell phone increases significantly, consumers may opt for a different brand or choose to purchase a different electronic device altogether.
Consumer expectations: Consumer expectations about future prices, income levels, or economic conditions can affect their current demand. If consumers anticipate future price increases, they may be motivated to purchase the product at the present price, leading to an increase in current demand. Similarly, if consumers expect their income to decrease, they may reduce their current demand for certain goods and services.
It is important to note that these factors do not act independently but often interact with each other, influencing the overall demand for goods and services in the market.
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Using the following information:
The bank statement balance is $4,333.
The cash account balance is $4,601.
Outstanding checks amounted to $834.
Deposits in transit are $1,021.
The bank service charge is $72.
A check for $37 for supplies was recorded as $28 in the ledger.
Prepare a bank reconciliation for Candace Co. for May 31.
Candace Co.
Bank Reconciliation
May 31
Cash balance according to bank statement $fill in the blank 1
Adjustments:
Bank service chargeDeposits in transit not recorded by bankError in recording check
$- Select -
Bank service chargeError in recording checkOutstanding checks
- Select -
Total adjustments fill in the blank 6
Adjusted balance $fill in the blank 7
Cash balance according to company's records $fill in the blank 8
Adjustments:
Bank service chargeDeposits in transit not recorded by bankOutstanding checks
$- Select -
Deposits in transit not recorded by bankError in recording checkOutstanding checks
- Select -
Total adjustments fill in the blank 13
Adjusted balance $fill in the blank 14
Candace Co.
Bank Reconciliation
May 31
Cash balance according to bank statement $4,333
Adjustments:
Bank service charge: -$72
Deposits in transit not recorded by bank: +$1,021
Error in recording check: +$9 ([$37 - $28])
Total adjustments: $958
Adjusted balance: $5,291 ($4,333 + $958)
Cash balance according to company's records $4,601
Adjustments:
Deposits in transit not recorded by bank: +$1,021
Error in recording check: +$9 ([$37 - $28])
Outstanding checks: -$834
Total adjustments: $196
Adjusted balance: $4,797 ($4,601 + $196)
To prepare the bank reconciliation for Candace Co. on May 31, we need to compare the cash balance according to the bank statement with the cash balance according to the company's records and make adjustments for any discrepancies.
Cash balance according to the bank statement is given as $4,333.
Adjustments:
Bank service charge: The bank service charge is listed as -$72. This amount needs to be deducted from the bank statement balance.
Deposits in transit not recorded by bank: The deposits in transit, which are $1,021, have not been recorded by the bank yet. Therefore, we need to add this amount to the bank statement balance.
Error in recording check: There is an error in recording a check for supplies. The check was recorded as $28 in the ledger, but it should be $37. The difference is $9, and we need to add this amount to the bank statement balance.
Total adjustments: The total adjustments are the sum of the adjustments mentioned above, which is $958.
Adjusted balance: The adjusted balance is calculated by adding the total adjustments to the cash balance according to the bank statement. Thus, the adjusted balance is $5,291 ($4,333 + $958).
Cash balance according to the company's records is given as $4,601.
Adjustments:
Deposits in transit not recorded by bank: The deposits in transit, which are $1,021, have not been recorded by the bank yet. Therefore, we need to add this amount to the company's cash balance.
Error in recording check: There is an error in recording a check for supplies. The check was recorded as $28 in the ledger, but it should be $37. The difference is $9, and we need to add this amount to the company's cash balance.
Outstanding checks: Outstanding checks amount to $834. These checks have been issued by the company but have not been cleared by the bank yet. Thus, we need to subtract this amount from the company's cash balance.
Total adjustments: The total adjustments are the sum of the adjustments mentioned above, which is $196.
Adjusted balance: The adjusted balance is calculated by adding the total adjustments to the cash balance according to the company's records. Therefore, the adjusted balance is $4,797 ($4,601 + $196).
By comparing the adjusted balances, we can see that there is a discrepancy between the bank and company's cash balances. Further investigation may be required to reconcile the difference.
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.In a perfectly competitive industry, there are two types of firms: low-cost producers and high-cost producers. The minimum average total cost of the high-cost producers is $150. The low-cost producers have a long-run total cost curve given by LTC = 150Q - 15Q2 + 0.4Q3, where LMC = 150 - 30Q + 1.2Q2. How much economic rent does the low-cost producer earn?
The economic rent earned by the low-cost producer is $1,275.
To calculate the economic rent earned by the low-cost producer, we need to compare its average total cost (ATC) with the market price.
Given that the low-cost producer's long-run total cost (LTC) is given by LTC = 150Q – 15Q² + 0.4Q², we can find its ATC by dividing LTC by the quantity produced (Q).
ATC = (150Q – 15Q² + 0.4Q³) / Q
= 150 – 15Q + 0.4Q²
The market price is given as $100.
To find the economic rent, we subtract the ATC from the market price and multiply it by the quantity produced (Q).
Economic Rent = (Market Price - ATC) * Q
= (100 - (150 - 15Q + 0.4Q²)) * Q
= (100 - 150 + 15Q - 0.4Q²) * Q
= (-50 + 15Q - 0.4Q²) * Q
= -0.4Q³ + 15Q² - 50Q
Substituting the given quantity (Q = 15) into the equation, we can find the economic rent
Economic Rent = -0.4(15)³ + 15(15)² - 50(15)
= -0.4(3375) + 15(225) - 750
= -1350 + 3375 - 750
= 1275
Therefore, the economic rent is $1,275.
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--The given question is incomplete, the complete question is given below " In a perfectly competitive industry, there are two types of firms: low-cost producers and high-cost producers. The minimum average total cost of the high-cost producers is $150. The low-cost producers have a long-run total cost curve given by LTC = 150Q –15Q2 + 0.4Q2, where LMC = 150 – 30Q + 1.2Q2. How much economic rent does the low-cost producer earn? p = $100, q = 15"--
Discuss these questions/topic:
Distinguish between internet and digital banking and discuss the benefits of digital banking
Payment services, their methods, innovations and competition. Select a few to comment on.
Distinguish between digital, virtual and crypto currencies and their use in the payment system.
Traditionial banks stand threatened. Where is the threat coming from? Discuss
Discuss e-technology developments in mortgage and insurance industry.
Security and Privacy Issues in e-banking
Technology trends: what is open banking?
Internet banking refers to the provision of banking services through the Internet, allowing customers to access their accounts, make transactions, and manage their finances online.
Digital banking, on the other hand, encompasses a broader range of banking services that are delivered through digital channels, including mobile applications, ATMs, and other electronic platforms.
The benefits of digital banking include convenience, 24/7 accessibility, faster transactions, cost savings for banks, and personalized services.
Payment services encompass various methods of transferring funds and making transactions.
Virtual currencies, on the other hand, are digital representations of fiat currencies, like digital dollars or euros.
Both digital and virtual currencies can be used for payments, but cryptocurrencies offer additional features such as anonymity and potential for investment.
Traditional banks face threats from various sources. Fintech startups and digital banks offer innovative and customer-centric services that attract tech-savvy customers.
Big tech companies also pose a threat as they have vast user bases and the ability to integrate financial services into their platforms. Regulatory changes and evolving customer preferences toward digital solutions further contribute to the challenges faced by traditional banks.
In the mortgage and insurance industries, e-technology developments have revolutionized processes. Online mortgage applications streamline the application and approval process, reducing paperwork and enhancing customer experience.
Security and privacy are critical concerns in e-banking. The risk of unauthorized access, data breaches, and identity theft is a constant challenge.
Banks employ advanced security measures like encryption, multi-factor authentication, and fraud detection systems to protect customer information. Privacy regulations such as the General Data Protection Regulation (GDPR) also play a vital role in safeguarding customer data and ensuring transparency.
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In private carriage, which of the following is an incorrect statement?
A) If excess capacity exists, or in some other instances, private fleets can haul products for other unrelated organizations.
B) The organization does not have to own the equipment used to transport the products.
C) Private carriage is also a financial decision that organizations make.
D) Private fleets primarily transport products owned by their organization or are owned by other members of their supply chain.
E) The vast majority of private carriage involves truck transport.
The incorrect statement is, Private fleets primarily transport products owned by their organization or are owned by other members of their supply chain. Option D is the answer.
Private carriage refers to the transportation of goods by a company's own fleet or by hiring third-party carriers exclusively for their own use. Private fleets can transport products owned by their organization, but they generally do not transport products owned by other members of their supply chain.
Private carriage is distinct from common carriage, where transportation services are offered to the general public. Private carriage allows companies to have control over their transportation operations and tailor them to their specific needs. It is important to accurately understand the scope of private carriage, which typically involves the organization's products and not products owned by others in the supply chain. Option D is the answer.
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Erin wants to double her money in 17 years in an investment
fund. What nominal monthly compounding interest rate do you suggest
that she look for? (Hint: If money doubles, the ratio of FV to PV
is 2.)
If Erin wants to double her money in 17 years, she must invest in nominal monthly compounding interest rate of 6.76% per annum.
To find out the nominal monthly compounding interest rate that Erin should look for to double her money in 17 years in an investment fund, we will use the following formula:
Future Value = Present Value x (1 + r/n)^(n x t),
where
FV = 2 PV (since Erin wants to double her money),PV = Present Value (the initial amount that Erin wants to invest),r = nominal annual interest rate (the interest rate advertised by the bank or the institution),n = number of times the interest is compounded per year, andt = time (in years)Erin wants to double her money in 17 years.We have to find the nominal monthly compounding interest rate.
Therefore, we will convert 17 years to months:
17 years = 17 x 12 months = 204 months
PV = 1r/n = r/12 (since Erin wants to know the nominal monthly compounding interest rate)
Now, substituting the values in the formula, we get:
2 PV = PV x (1 + r/12)^(12 x 204)2 = (1 + r/12)^(2,448)r/12 = 0.0056354
r = 0.0676 or 6.76%
Therefore, Erin should look for a nominal monthly compounding interest rate of 6.76% per annum to double her money in 17 years in an investment fund.
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You are considering investing in two call options both of which expire on the same day and have the same strike price. The underlying stock's market price for the first option is $75 and the underlying stock's market price for the second option is $80. Which of the following statements is accurate?
The correct option is that the call option with a market price of $75 has a lower premium than the call option with a market price of $80.
A call option is an agreement where the owner of the option has the right to buy an underlying asset, which is typically a stock, at a predetermined price, which is known as the strike price, before the option contract expires.The premium for a call option is the price that the owner of the option must pay to buy the call option, which gives the owner the right to buy the underlying asset at the strike price.
The premium for a call option is based on various factors, including the underlying asset's market price, the strike price, the time until expiration, and the volatility of the underlying asset. The higher the market price of the underlying asset, the higher the premium for a call option.
On the other hand, if the market price of the underlying asset is low, then the premium for a call option will also be low. This is because the option is less likely to be exercised if the market price of the underlying asset is lower than the strike price. Therefore, in this case, the call option with a market price of $75 has a lower premium than the call option with a market price of $80, as the market price of the underlying asset for the first option is lower than the second option.
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4. The PE ratio multiple shows its limitations when: a. There are significant extraordinary incomes or expenses b. Many comparables have negative earnings c. Firms in the industry have very different
When there are significant extraordinary incomes or expenses, the PE ratio multiple shows its limitations.
The price-to-earnings (P/E) ratio is a ratio that measures the stock price in relation to earnings. It is a valuation ratio that is used to compare the market value of a company's shares to its earnings per share (EPS).However, the PE ratio multiple has its limitations, and one of them is that it shows its limitations when there are significant extraordinary incomes or expenses. This is because earnings that are not usual or consistent will impact the PE ratio and can make it seem as if the company is overvalued or undervalued. In conclusion, when there are significant extraordinary incomes or expenses, the PE ratio multiple shows its limitations.
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The Police Department (PD) would like to know whether forgiving a first-time offender for a drug related crime might actually reduce the likelihood they commit crime in the future. Consider the crime of possession of a small quantity of marijuana committed by a minor (an individuals aged less than 18 years of age). Assume that the law states that if a minor is caught with 5 grams of marijuana for the first time, they only get a warning. If the quantity is higher than 5 grams, the minor gets charged and convicted of a serious crime. Adults (age 18 or more) get arrested and convicted regardless of the quantity of marijuana they are caught carrying.
You are hired as a consultant to help the PD to answer the question whether forgiving a first- time offender for a drug related crime might actually reduce the likelihood they commit crime in the future. The PD holds administrative records of the universe of warnings, offenses, as well as the individuals’ gender, age, and address.
In answering questions below, note that general statements about econometric methods will yield no marks. Adapt and assume the necessary assumptions to this particular setting and use equations and or graphs to support your argument. If using graphs, make sure that the axes are labelled correctly.
(i) Discuss the endogeneity problem in studying the above problem
(ii) What econometric method would be suitable for you to use in this setting to answer the question of interest to the PD?
(iii) Describe in detail the method in (ii) applied to this setting. What are the identifying assumptions of the method in (ii)?
(iv) How can the identifying assumptions be tested? Which graphs would be useful in supporting your arguments?
(i) The endogeneity problem in studying this problem arises because of the potential correlation between the decision to forgive the first-time offender and the likelihood of committing a future crime.
(ii) A suitable econometric method in this setting would be a difference-in-differences (DD) approach.
(iii) In the DD approach, we compare the change in the future crime rate of those who received a warning for a drug-related crime (the treatment group) before and after the warning, with the change in the future crime rate of those who were charged and convicted of the crime (the control group) over the same time period.
(iv) The parallel trends assumption can be tested visually with a graph of the pre-treatment period crime rates for both the treatment and control groups.
For example, if a certain group of minors are more likely to receive a warning instead of being charged, it could be because they live in a wealthier neighbourhood, have parents who are well-connected or for some other reason make it less likely they will commit crimes in the future. Thus, a failure to account for such factors can lead to biased estimates of the effect of forgiveness on future crime rates.
In the DD approach, we compare the change in the future crime rate of those who received a warning for a drug-related crime (the treatment group) before and after the warning, with the change in the future crime rate of those who were charged and convicted of the crime (the control group) over the same time period. The identifying assumption of this method is the parallel trends assumption, which means that in the absence of the warning, the treatment and control groups would have had the same trend in future crime rates.
If the treatment and control groups have similar pre-treatment trends, it provides some evidence in support of the assumption. Additionally, we can estimate the DD model and test for the significance of the interaction term between the treatment indicator and time dummies. If the interaction term is statistically significant, it suggests that the parallel trends assumption may not hold. We can also conduct a placebo test by setting the treatment period to be before the policy change and ensure that there is no significant difference in crime rates between the treatment and control groups during the placebo period.
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You have a definite plan in mind about new product launches for the new financial year.
Three months after the plan was made, you find that you have to make frequent changes to the original plan because of business environmental factors. Should you discard planning altogether? If not, what is your reason?
Discarding planning altogether is not recommended. Planning remains essential despite the need for frequent changes due to business environmental factors.
Planning serves as a roadmap for an organization, outlining goals, strategies, and actions to achieve them. While unforeseen circumstances may require adjustments, the initial plan provides a foundation and direction. Changes in the business environment, such as market fluctuations or new competitors, necessitate adaptability.
By continually revisiting and modifying the plan, the organization can respond effectively to these factors while staying aligned with its objectives. Planning allows for better resource allocation, coordination, and decision-making, even in a dynamic environment. Therefore, instead of discarding planning, it is crucial to embrace it as a flexible tool to navigate changes and maintain strategic focus.
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Free soul is a personal products company manufacturing shampoo, conditioner, and liquid soap selling 2 million bottles of shampoo under Free soul brand. The operations director wishes to use the spare capacity on the manufacturing line by producing a shampoo for a supermarket chain under the supermarket’s own label. The operations director confirms that the contract would be for 450,000 bottles and be sold at a 20% discount on current selling prices £1.50 per bottle. Direct costs would be the same (£0.6 per bottle), but instead of variable distribution costs (£0.2 per bottle) there would be a bulk delivery charge of £80,000. Allocated costs are £0.45 per bottle. Assess the impact of agreeing to the contract. What other factors should be taken into account?
By agreeing to the contract, Free Soul would experience a decrease in selling price per bottle and incur a bulk delivery charge, impacting their profitability.
Agreeing to the contract with the supermarket chain for the production of 450,000 bottles of shampoo at a 20% discount on the current selling price (£1.50 per bottle) would have several impacts on Free Soul's operations.
Selling Price Impact: The discounted price would reduce the selling price per bottle, resulting in lower revenue generated from the supermarket contract compared to selling under the Free Soul brand. This would directly impact the company's profitability.
Direct Costs: The direct costs per bottle would remain the same (£0.6 per bottle) for the supermarket contract, so the cost of manufacturing the additional bottles would not change.
Distribution Costs: Instead of variable distribution costs (£0.2 per bottle), Free Soul would incur a bulk delivery charge of £80,000 for the supermarket contract. This fixed delivery charge could impact the overall cost structure and profitability, depending on the volume of bottles produced and delivered.
Allocated Costs: The allocated costs per bottle (£0.45 per bottle) would still apply to the supermarket contract, contributing to the overall cost structure of the production.
In assessing the impact of agreeing to the contract, Free Soul needs to consider the financial implications of the reduced selling price, the additional bulk delivery charge, and the overall profitability of the supermarket contract. It is essential to analyze the cost structure, production capacity, and potential long-term benefits or drawbacks of entering into the contract.
Other factors that should be taken into account include the impact on the Free Soul brand image, potential conflicts with existing customers or distribution channels, the ability to meet production demands, and the overall strategic fit of the supermarket contract within Free Soul's business objectives.
Ultimately, a comprehensive analysis of the financial and non-financial factors is necessary to make an informed decision about whether accepting the contract aligns with Free Soul's goals and overall profitability in the long run.
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1. Consider the following multiple linear regression model
Y= Xiβ +ε
(a) Derive the ordinary least squares estimator
(b) According to Gauss Markov theorem, OLS estimator is said to be BLUE. Do you agree/Disagree? Show that OLS is
(i) Unbiased; - the expected values of the estimated beta and alpha equal the true values describing the relationship between X and Y
(ii) Linear; - if the relationship is not linear – OLS is not applicable
(iii) Best ; - variance of the OLS estimator is minimal, smaller that the variance of any other estimator
OLS estimator is best among the estimators as it satisfies the Gauss-Markov theorem, and it has a minimum variance among all the unbiased estimators.
Consider the following multiple linear regression model:
Y= Xiβ +ε
To derive the ordinary least squares estimator, the residuals are found by minimizing the sum of the squared residuals or the sum of the squared difference between the actual and predicted value of the dependent variable.The ordinary least square (OLS) estimator is said to be BLUE (Best Linear Unbiased Estimator). It satisfies the three following properties:
i) Unbiased; - the expected values of the estimated beta and alpha equal the true values describing the relationship between X and Y
ii) Linear; - if the relationship is not linear – OLS is not applicable
iii) Best ; - variance of the OLS estimator is minimal, smaller that the variance of any other estimator.
i) Unbiased estimator: An estimator is said to be unbiased if the expected value of the estimator is equal to the true value of the population parameter that it estimates. The unbiasedness of the OLS estimator can be shown as follows: E(b) = βThus, the OLS estimator is unbiased as its expected value is equal to the population parameter β.
ii) Linear estimator: If the relationship between the dependent and independent variable is non-linear, the OLS estimator cannot be applied. The OLS estimator is a linear function of Y and the Xi and thus is linear.
iii) Best estimator: The OLS estimator is said to be the best estimator as it has the minimum variance among all the other estimators. It satisfies the Gauss-Markov theorem which states that if the errors are homoscedastic and the independent variables are non-stochastic, the OLS estimator is the Best Linear Unbiased Estimator (BLUE).
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"The Definition of money is to be sought for not on grounds of principle but on grounds of usefulness in organizing our knowledge of economic relationships. ‘Money’ is that to which we chose to assign a number of specified operations, it is not something in existence to be discovered, like the American continent; it is a tentative scientific construct to be invented, like ‘length’ or ‘temperature’ or ‘force’ in Physics". Friedman, M and Anna J. Schwartz (1970), Monetary Statistics of The U.S, New York, NBER, p 137.
a. Critically examine this passage in the light of the benefits enjoyed by a money-using economy which are not available to the barter economy.
b. Do you think the choice of a particular monetary aggregate, a priori, would have made any difference to economic policy in your Country?
c. Briefly explain the implications of the emergence of digital cash, especially mobile money, for savings mobilization and monetary policy in Ghana
a. In the quote by Friedman and Schwartz, they assert that "money" is a "tentative scientific construct," meaning that it is not something tangible that we can discover, like the American continent. Instead, it is a useful concept that we have created to help us better understand economic relationships.
The benefits of a money-using economy are numerous. First, money facilitates trade by providing a common medium of exchange. Without money, individuals would have to engage in barter, which is an inefficient means of exchange. Second, money allows for the accumulation of wealth.
b. The choice of a particular monetary aggregate can have a significant impact on economic policy. For example, if policymakers choose to target the money supply, they will have to adjust interest rates to keep the money supply at the desired level. This, in turn, can impact inflation, employment, and other economic variables.
c. The emergence of digital cash, especially mobile money, has significant implications for savings mobilization and monetary policy in Ghana. Mobile money makes it easier for people to save money, as they can store their funds in a digital wallet on their mobile phone. This can help increase the level of savings in Ghana, which is essential for economic growth. Mobile money can also help increase financial inclusion, as it allows people who do not have access to traditional banking services to save and make transactions.
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Ten years ago, you deposited P5400 per month. You made the
deposit for 6 years and then stopped. 4 years later, you
established a belts and nuts factory, and start withdrawing P2,300
every month for a
The total deposit made for the period of six years can be computed as P5400*12*6 = P3,10,800. The number of months between the time the deposit stopped and when it resumed is four years * 12 months = 48 months.
The total amount withdrawn from the establishment of the belt and nuts factory is P2,300*48 = P1,10,400. In order to find the total deposit made over the period of six years, the monthly deposit made must be multiplied by the number of months in six years.P5400 is deposited monthly, therefore the total deposit made is P5400*12*6 = P3,10,800.When the deposit stopped after the sixth year, a period of four years went by before it was resumed.
Four years is equivalent to 48 months, thus, the total number of months the deposit was not made was 48 months.At the point of resuming the deposit, the establishment of a belt and nuts factory was created, which required the monthly withdrawal of P2,300. Therefore, the total amount withdrawn is P2,300*48 = P1,10,400.
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The management of Local Cinema has estimated the monthly demand for tickets to be in Q=22,328 -0.41 In P+0.5 in M -0.33 In A +100 In PDVD, where Q = quantity of tickets demanded, P = price per ticket, M = income, A = advertising outlay, and PDVD= price of a DVD rental. It is known that P = $5.50, M = $9,000, A = $900, and Pvcr = $3.00. Based on the information given, which of the following statements is false?
d) When P increases, the demand for tickets decreases.When the price of the ticket increases, the demand for tickets decreases. The inverse relationship is given in the demand function.option (d) is the false statement.
The given demand function is as follows :Q = 22328 − 0.41P + 0.5M − 0.33A + 100PDVD.
P = $5.50M = $9,000A = $900PDVD = $3.00.
Now we need to plug these values into the demand function to obtain the value of Q:
Q = 22328 − 0.41(5.5) + 0.5(9000) − 0.33(900) + 100(3)Q = 22328 − 2.255 + 4500 − 297 + 300Q = 27079.745 ≈ 27080.
The estimated monthly demand for tickets is 27080. Now, we will check which of the given statements is false.
a) When M increases, the demand for tickets increases.
b) When A decreases, the demand for tickets increases False. This statement is false. When advertising outlay decreases, the demand for tickets decreases. More advertising makes people aware of new movies and attracts them to the cinema.
c) When PDVD decreases, the demand for tickets increase False. This statement is true. When the price of DVD rental decreases, people tend to prefer DVDs over cinema.
Hence, the demand for tickets decreases.. This statement is false. When the price of the ticket increases, the demand for tickets decreases. The inverse relationship is given in the demand function.
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If the production function features increasing returns to scale producing a higher quantity
(a) reduces the variable cost of production
(b) reduces the fixed cost of production
(c) reduces the average cost of production
(d) All answers are correct
If the production function features increasing returns to scale producing a higher quantity, it reduces the average cost of production.
The correct option is c) . reduces the average cost of production.
The increasing returns to scale imply that an increase in the input leads to a more than proportional increase in output. Thus, as the production level rises, the total cost of production does not increase proportionally, resulting in a decline in average cost of production.
When production increases, it leads to economies of scale. Economies of scale happen when there is an increase in production, and it results in a decrease in the cost of production per unit. This is because the cost of producing each unit of output falls as the number of units produced rises. Thus, the average cost of production falls as production increases with increasing returns to scale.
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Smart Company in a competitive product market. The expected seting price is $340 per unit, and Smart Company's target pet is 20%
a. true
b. false
The given statement "Smart Company in a competitive product market. The expected setting price is $340 per unit, and Smart Company's target pet is 20%" is false because a target market is a group of customers to whom a firm intends to sell its goods or services.
It is a segment of the overall market that a company has decided to focus its marketing efforts on. A target market is typically divided into groups based on demographic data, such as age, gender, income level, and other characteristics. The price at which a firm's product or service is sold to customers is referred to as the set price. A firm's pricing policy is critical since it affects a variety of aspects of its operations, including sales, profits, and market share. Setting a price is influenced by a variety of variables, including manufacturing costs, competitor pricing, and consumer demand. The amount of money that a seller anticipates a buyer will pay for a product or service is referred to as a target price. The target price is the maximum price that a customer is willing to pay for a product or service. It is determined by the supply and demand of the product or service and the competition in the market. The answer is "False."
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Gary's workbook include three worksheets of data and text. Minutes to change all instance of account to accounts (plural). He estimates that account a virus at least 75 times in the workbook. What do you recommend?
A. Use find to locate each instance and make the manual change one by one
B. Use replace all to change all instances on every tab simultaneously
C. Klik the replace button for each instances as find locates it.
D. Make one manual replacement and then copy and paste to all other instances
Gary's workbook includes three worksheets with data and text. To replace all the instances of accounts with accounts (plural), it is recommended to use the Replace All function.
This is the quickest and most efficient way of replacing the word throughout the workbook. By using the Replace All function, you don't have to go to each cell or sheet to make the change manually. Gary's workbook is quite large, and the time taken to make each replacement manually will be significantly higher than using the Replace All function. Manually replacing each occurrence of the word "account" with "accounts" is not a practical solution as it will be time-consuming and prone to errors.
On the other hand, by using the Replace All function, you can change all instances on every tab simultaneously. This ensures that no instance is missed, and the entire workbook is consistent. Using the Replace All function is also quite simple. All you have to do is go to the Find and Replace dialog box, enter "account" in the "Find what" field and "accounts" in the "Replace with" field. Clicking on "Replace All" will replace all instances of "account" with "accounts" in one go. It is recommended to use the Replace All function to replace all instances of "account" with "accounts" in Gary's workbook. This is the quickest and most efficient way of replacing the word throughout the workbook. Manually replacing each occurrence of the word is time-consuming and prone to errors.
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Laurel Enterprises expects earnings next year of $3.81 per share and has a 30% retention rate, which it plans to keep constant. Its equity cost of capital is 11%, which is also its expected retum on new investment. Its earnings are expected to grow forever at a rate of 3.3% per year. If its next dividend is due in one year, what do you estimate the firm's current stock price to be? The current stock price will be $
Given: Earnings per share next year = 3.81Retention ratio = 30%Equity cost of capital = expected return on new investment = 11%Earnings growth rate = 3.3% per year Dividend due in one year .
The Gordon growth model is given as: P = D1 / (Ke - g)where, P = current stock priced 1 = next year's dividend Ke = equity cost of capital g = earnings growth rate We can find out the value of D1 as:D1 = Earnings per share * Retention ratio[tex]D1 = 3.81 * 0.30D1 = $1.143Now we can find out the value of P as:P = D1 / (Ke - g)P = 1.143 / (0.11 - 0.033)P = $12.77[/tex]
Therefore, the current stock price of the firm is[tex]$12.77[/tex].
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explain house’s concept of charisma and identify five types of behaviors exhibited by charismatic leaders.
According to sociologist Max Weber, charisma is a concept used to describe a unique and extraordinary quality possessed by certain individuals that enables them to exert a strong influence over others.
Charismatic leaders are characterized by their exceptional personal qualities, their ability to inspire and motivate others, and their ability to create a sense of devotion and loyalty among their followers.
Five types of behaviors commonly exhibited by charismatic leaders are:
Inspirational Communication: Charismatic leaders have the ability to articulate a compelling vision and communicate it in a way that captivates and inspires their followers.
Self-Confidence: Charismatic leaders exude a high level of self-assurance and belief in their own abilities.
Empathy: Charismatic leaders demonstrate a genuine concern and understanding for the needs and emotions of their followers.
Visionary Thinking: Charismatic leaders possess a clear and compelling vision for the future..
Personal Magnetism: Charismatic leaders possess a magnetic and captivating personality that attracts others to them.
These behaviors collectively contribute to the charismatic leader's ability to rally others around their cause, create a strong sense of identity and purpose.
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ABC company is considering whether or not to invest in a joint venture.The initial cost is $7.2 million and the estimated operating cash flows are shown in the following table:
Period Cash Flow
1，$900.000,
2，$930,000
3，$950,000
The NPV is positive which means that the company will earn an additional $74,435 from this investment in the long run is the answer.
The Net Present Value (NPV) is the difference between the total present value of cash inflows and the initial cash outflow. In this case, ABC is considering investing $7.2 million into a joint venture with estimated operating cash flows of $900,000, $930,000, and $950,000 over three years.
To calculate the NPV of the joint venture, ABC must first determine the discount rate. The discount rate represents the cost of capital to the firm. If ABC uses a cost of capital of 12%, the present value of the cash flows can be calculated as follows:
Year 1: $900,000 / (1 + 0.12)^1 = $803,571
Year 2: $930,000 / (1 + 0.12)^2 = $758,657
Year 3: $950,000 / (1 + 0.12)^3 = $712,207
NPV = -$7,200,000 + $803,571 + $758,657 + $712,207 = $74,435
With a positive NPV of $74,435, ABC should consider investing in the joint venture.
The NPV is positive which means that the company will earn an additional $74,435 from this investment in the long run.
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Which of the following personality dimensions is typically associated with a person being nondepressed, secure, and content?
a. Extroversion b. Adjustment c. Agreeableness
d. Conscientiousness e. Openness to experience
Adjustment is a personality dimensions that is typically associated with a person being non-depressed, secure, and content. The correct option is B.
The personality dimension typically associated with a person being non-depressed, secure, and content is "adjustment." Adjustment refers to an individual's emotional stability, resilience, and ability to cope with stress. People with high levels of adjustment tend to have a positive outlook, exhibit emotional well-being, and are less prone to experiencing depression or anxiety.
They are secure in themselves and their environment, displaying a sense of contentment. In contrast, individuals with lower levels of adjustment may be more susceptible to negative emotions, insecurity, and dissatisfaction. Therefore, when it comes to being nondepressed, secure, and content, the personality dimension of adjustment plays a significant role.
The correct option is B.
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Edelman Engines has $20 billion in total assets – of which cash and equivalents total $90 million. Its balance sheet shows $3 billion in current liabilities – of which the notes payable balance totals $1.05 billion. The firm also has $9 billion in long-term debt and $8 billion in common equity. It has 400 million shares of common stock outstanding, and its stock price is $24 per share. The firm's EBITDA totals $1.152 billion. Assume the firm's debt is priced at par, so the market value of its debt equals its book value. What are Edelman's market/book and its EV/EBITDA ratios?
When, firm's debt will be priced at par, so the market value of its debt equal to its book value. Then, the Edelman Engines' EV/EBITDA ratio is approximately 16.06.
To calculate Edelman Engines' market/book ratio, we need to determine the market value and book value of its equity.
Market value of equity = Number of shares outstanding × Stock price
Market value of equity = 400 million × $24
Market value of equity = $9.6 billion
Book value of equity = Total assets - Total liabilities
Book value of equity = $20 billion - ($3 billion + $9 billion)
Book value of equity = $8 billion
Market/book ratio = Market value of equity / Book value of equity
Market/book ratio = $9.6 billion / $8 billion
Market/book ratio = 1.2
Therefore, Edelman Engines' market/book ratio is 1.2.
To calculate Edelman Engines' EV/EBITDA ratio, we need to determine its enterprise value (EV) and EBITDA.
Enterprise value (EV) = Market value of equity + Total debt - Cash and equivalents
EV = $9.6 billion + $9 billion - $90 million
EV = $18.51 billion
EV/EBITDA ratio = Enterprise value (EV) / EBITDA
EV/EBITDA ratio = $18.51 billion / $1.152 billion
EV/EBITDA ratio = 16.06
Therefore, Edelman Engines' EV/EBITDA ratio will be 16.06.
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Bailey Buyer purchases a screwdriver for $2 from Sid's Hardware Store. He lends the screwdriver to his neighbor, Dan Dimwit, who uses the screwdriver as a chisel to break up a piece of crumbling cement in his backyard in order to rebuild it. While Dan is hammering at the screwdriver with a sledgehammer, it breaks and a piece of the handle flies into his eye, causing him a minor eye injury. Explain which warranties attach to this sale to Bailey and whether they also extend to Dan. Discuss the elements of any warranty claim and Dan's chances of winning a suit against Sid's Hardware Store for breach of warranty. Be sure to discuss whether the hardware store has any defense. Explain fully for full credit.
Sid's Hardware Store may be liable for breach of implied warranty of merchantability, but Dan's chances of winning are uncertain due to misuse.
For this situation, the suggested guarantee of merchantability would connect to the offer of the screwdriver to Bailey since Sid's Home improvement shop is a trader.
This guarantee ensures that the screwdriver is good for its normal reason and of satisfactory quality. In the event that the screwdriver was deficient or not reasonable for its planned use, Bailey would have a case under this guarantee.
Nonetheless, the guarantee may not stretch out to Dan since he acquired the screwdriver from Bailey and was not the first buyer. Dan's possibilities winning a suit against Sid's Home improvement shop for break of guarantee are unsure as he is an outsider to the first deal.
Sid's Home improvement shop might actually contend the protection of abuse of the item. Dan involved the screwdriver as an etch and exposed it to exorbitant power with a demo hammer, which was not its planned use.
The store might battle that the injury came about because of Dan's carelessness or abuse, as opposed to a deformity in the screwdriver. The result of the claim would rely upon the particular conditions and proof introduced.
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if
firms invest out of retained profit rather than borrowed capital,
will its investment decision be affected by interest rates?
Explain?
Firms that invest out of retained profit rather than borrowed capital, will not be affected by the interest rates. In most cases, firms make investments to expand their operations, reduce the costs, and increase efficiency. Retained profits are the amount of money that the company has left after distributing dividends to shareholders.
This money is used to reinvest in the company's operations. Since there is no interest paid on retained profits, the interest rates do not affect the investment decisions of the firms. If the firms decide to borrow money to invest in their operations, they will be affected by the interest rates.
If the interest rates are high, the cost of borrowing will be higher, and the firms may decide to postpone the investments until the interest rates are low.If a firm is investing out of retained profit rather than borrowed capital, it is likely that the company has a strong financial position.
The company has enough money to reinvest in its operations without borrowing money from external sources. In this scenario, the interest rates do not play a role in the investment decisions of the firms. However, if the firms decide to borrow money, they need to consider the interest rates.
The interest rates can be a significant factor in the borrowing decision of the firms. If the interest rates are low, the cost of borrowing will be low, and the firms can invest more. On the other hand, if the interest rates are high, the cost of borrowing will be high, and the firms may decide to postpone the investments until the interest rates are low.
In conclusion, if firms invest out of retained profit rather than borrowed capital, their investment decision will not be affected by interest rates. However, if the firms decide to borrow money, they need to consider the interest rates.
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GoSnow sells snowboards. Each snowboard requires direct materials of $150, direct labor of $55, variable overhead of $65, and variable selling, general, and administrative costs of $30. The company has fixed overhead costs of $285,000 and fixed selling, general, and administrative costs of $355,000. The company has a target profit of $560,000. It expects to produce and sell 10,000 snowboards. Compute the selling price per unit using the variable cost method. (Round your intermediate calculations and final answer to nearest whole dollar amounts.) Selling price per unit
If the company has a target profit of $560,000, the selling price per unit using the variable cost method is $420.
To compute the selling price per unit using the variable cost method, we need to consider the variable costs and the target profit.
The variable costs per unit include direct materials, direct labor, variable overhead, and variable selling, general, and administrative costs. Adding these costs together, we get:
Variable costs per unit = Direct materials + Direct labor + Variable overhead + Variable selling, general, and administrative costs
= $150 + $55 + $65 + $30
= $300
Next, we need to determine the total fixed costs. The fixed costs include fixed overhead costs and fixed selling, general, and administrative costs. Adding these costs together, we get:
Total fixed costs = Fixed overhead costs + Fixed selling, general, and administrative costs
= $285,000 + $355,000
= $640,000
Now, we can calculate the total cost per unit by adding the variable costs per unit and the fixed costs per unit:
Total cost per unit = Variable costs per unit + (Total fixed costs / Number of units)
= $300 + ($640,000 / 10,000)
= $300 + $64
= $364
Finally, we can compute the selling price per unit using the formula:
Selling price per unit = Total cost per unit + Target profit per unit
= $364 + ($560,000 / 10,000)
= $364 + $56
= $420
This price covers the variable costs per unit, the fixed costs per unit, and achieves the target profit of $560,000.
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.According to expectancy theory, high motivation will occur when:
Expectancy is high.
Instrumentality is high.
Valence is high.
Any two of three factors—expectancy, instrumentality, or valence are high.
Expectancy, instrumentality, and valance are all high.
According to expectancy theory, high motivation will occur when expectancy, instrumentality, and valance are all high. Option E is the correct answer.
According to the expectancy theory, an individual's predisposition to act in a certain way is influenced by how strongly they expect their actions to result in a specific outcome and how appealing those results are to them. Option E is the correct answer.
An employee's motivation depends on how much they want a reward (Valence). The evaluation of the probability that an effort will result in the desired performance (Expectancy). The conviction that the desired performance will result in reward (Instrumentality). According to Vroom, employees choose consciously whether or not carry out their duties. The employee's degree of motivation, which is based on three factors—expectancy, valence, and instrumentality—was the only consideration in this choice.
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The complete question is, "According to expectancy theory, high motivation will occur when:
A. Expectancy is high.
B. Instrumentality is high.
C. Valence is high.
D. Any two of three factors—expectancy, instrumentality, or valence are high.
E. Expectancy, instrumentality, and valance are all high."
Multiple Choice . Please place the letter of your choice in the blank space. 1. The A) income statement B) statement of cash flows C) balance sheet is the summary of revenues and expenses for a period. 2. A) Revenue B) Loss C) Owner's withdrawal does not decrease owner's equity. 3. A) Multi-step B) Single-step C) Reorganized income statements itemize operating expenses under selling and administrative expenses. 4. Inventory is recorded on the balance sheet and becomes A) Common Stock B) Cost of Goods Sold C) Long-term Debt when sold. Please fill in the blanks 5. is a liability account for goods received by a business but not paid for yet. 6. have been incurred (service used) in the period but cash has not been paid yet. 7. From the company buying inventory's perspective, accounts _reflects the amount owed to a vendor. 8. We use to recognize the cost of an intangible asset over the periods it is used 9. Net income kept in the business and not paid in dividends goes into the account on the balance sheet 10. In preparing a statement of cash flows, an increase in the Common Stock during a period would be acn) activity
1. The income statement summarizes revenues and expenses. 2. Revenue does not decrease owner's equity.3. Multi-step income statements itemize operating expenses. 4. Inventory becomes Cost of Goods Sold when sold. 5. Accounts Payable is a liability for unpaid goods.
6. Accrued expenses have been incurred (service used) in the period but cash has not been paid yet. 7. From the company buying inventory's perspective, accounts Accounts Payable reflects the amount owed to a vendor. Accounts Payable reflects the amount owed to a vendor. 8. Amortization is used to recognize the cost of intangible assets. 9. Net income not paid in dividends goes into Retained Earnings. 10.An increase in Common Stock is a financing activity in the statement of cash flows.
1.The A) income statement is the summary of revenues and expenses for a period.
2.A) Revenue does not decrease owner's equity.
3.A) Multi-step income statements itemize operating expenses under selling and administrative expenses.
4.Inventory is recorded on the balance sheet and becomes B) Cost of Goods Sold when sold.
5.Accounts Payable is a liability account for goods received by a business but not paid for yet.
6.Accrued expenses have been incurred (service used) in the period but cash has not been paid yet.
7.From the company buying inventory's perspective, accounts Payable reflects the amount owed to a vendor.
8.We use Amortization to recognize the cost of an intangible asset over the periods it is used.
9.Net income kept in the business and not paid in dividends goes into the Retained Earnings account on the balance sheet.
10.In preparing a statement of cash flows, an increase in the Common Stock during a period would be categorized as a financing activity.
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