Discussion Questions

In 200 word responds for each question. Original work only. If refernce is use please format using APA.

·Much recent research in accounting and finance has concentrated on whether the stock markets are efficient. An efficient capital market is one in which market prices fully reflect all information available to the public. Suppose you are the CEO of a company with reported earnings of $4 per share and stock price of $40. You are contemplating changing your method of depreciation for investor-reporting purposes from accelerated to straight line. Your competitors use the straight line method. You think your company’s stock price unjustifiably suffers in comparison with other companies in the same industry. If straight line depreciation is adopted, your company’s reported earnings will be $5 instead of $4 per share. Would the stock price rise accordingly from $40 to $50? Please explain your answer.

· Please explain the following terms:

· Time-series comparisons

· Benchmarks

· Cross-sectional comparisons

· What is the first step in an analysis of financial statements? Why? What is a limitation common to both the current and the quick ratio?

· Please explain the different types of debt and the advantages of debt financing.

· The value of the stock of a corporation declined dramatically after its board of directors exercised poor business judgment in deciding to expand into foreign markets. Nevertheless, the corporation can indemnify the directors and pay their attorney fees in defending a lawsuit brought by the shareholders. True or False? Why?

· In comparing the current ratios of two companies, why is it inappropriate for the analyst to assume that the company with the larger current ratio is more successful than the other company?

·

Two companies have the same amount of working capital. The current debt-paying ability of one company is weaker than the other. Please explain how this could occur.