Corporate Governance Overview

<p>It indicates the return needed to justify capital projects. (C)</p> Signup and view all the answers

<p>The risk associated with the company's borrowing practices. (D)</p> Signup and view all the answers

<p>Common stock. (C)</p> Signup and view all the answers

<p>Returns must exceed the cost of capital for successful projects. (C)</p> Signup and view all the answers

<p>The proportion of short-term debt versus long-term debt. (B)</p> Signup and view all the answers

<p>Based on the average beta of similar public companies (C)</p> Signup and view all the answers

<p>The combination of debt and equity financing costs (C)</p> Signup and view all the answers

<p>9.1% (D)</p> Signup and view all the answers

<p>Interest payments are tax-deductible (C)</p> Signup and view all the answers

<p>Regularly contest them to ensure accuracy (A)</p> Signup and view all the answers

<p>For projects with unknown performance risks (D)</p> Signup and view all the answers

<p>To evaluate the effectiveness of investments (D)</p> Signup and view all the answers

<p>The investment provides a net benefit (B)</p> Signup and view all the answers

<p>A portion of a company's profits (A)</p> Signup and view all the answers

<p>Profitability, cash flow, and financial health (D)</p> Signup and view all the answers

<p>Mature companies in stable industries (A)</p> Signup and view all the answers

<p>A program allowing shareholders to reinvest dividends into additional shares (D)</p> Signup and view all the answers

<p>Consistent and steady payouts (D)</p> Signup and view all the answers

<p>The company's board of directors (A)</p> Signup and view all the answers

<p>Marketing strategies (A)</p> Signup and view all the answers

<p>Lower dividends may also occur (C)</p> Signup and view all the answers

<p>Providing a steady and predictable dividend payout (A)</p> Signup and view all the answers

<p>Dividends vary directly with earnings (C)</p> Signup and view all the answers

<p>Dividends are paid after capital expenditures are accounted for (B)</p> Signup and view all the answers

<p>To focus on reinvesting profits for growth (B)</p> Signup and view all the answers

<p>It shares characteristics of different dividend policies (D)</p> Signup and view all the answers

<p>The volatility of company earnings and dividends (C)</p> Signup and view all the answers

<p>When it wants to retain funds after necessary expenditures (D)</p> Signup and view all the answers

<p>They do not generate profits at all (C)</p> Signup and view all the answers

<p>To balance the interests of various stakeholders (C)</p> Signup and view all the answers

<p>Board of directors (A)</p> Signup and view all the answers

<p>It builds trust and provides transparency in operations (A)</p> Signup and view all the answers

<p>Bylaws, stock ownership guidelines, and articles of incorporation (B)</p> Signup and view all the answers

<p>By reducing the potential for financial loss and risks (B)</p> Signup and view all the answers

<p>Influencing governance decisions (B)</p> Signup and view all the answers

<p>Effective communication about corporate governance (C)</p> Signup and view all the answers

<p>Environmental awareness and ethical behavior (B)</p> Signup and view all the answers

<p>To determine the structure of a company's dividend payout. (D)</p> Signup and view all the answers

<p>The joining of two firms of approximately equal size to create a new entity. (D)</p> Signup and view all the answers

<p>Hostile takeover (B)</p> Signup and view all the answers

<p>The willingness of the companies to combine. (A)</p> Signup and view all the answers

<p>They can reflect a company's financial health. (C)</p> Signup and view all the answers

<p>Issuing new stock to dilute ownership (B)</p> Signup and view all the answers

<p>The company will only pay dividends based on its profits. (D)</p> Signup and view all the answers

<p>Two companies with similar market capitalizations join to create a new company. (C)</p> Signup and view all the answers

The expected rate of return required by investors for investing in a company. It represents the cost of obtaining capital from various sources like debt and equity.

A weighted average of the cost of debt and cost of equity, reflecting the proportion of each financing source in a company's capital structure.

A measure of a company's riskiness relative to the market. It indicates how much a company's stock price is expected to move in relation to the overall market.

The rate at which a company expects to earn a return on its investments to justify the cost of capital.

The cost of financing a project through debt. It takes into account the interest rate and tax deductions.

The cost of financing a project through equity. It is generally calculated as the expected rate of return desired by investors.

The relationship between the cost of capital and the potential returns from a project or investment. If returns exceed the cost of capital, the investment is considered profitable.

Using the cost of capital as a key factor in evaluating potential investments. A positive net present value (NPV), indicating returns exceeding the cost of capital, signifies a beneficial investment.

The mix of debt and equity a company uses to finance its operations and growth.

The ratio of a company's total debt to its total equity, indicating the level of financial risk the company takes on.

The financial resources a company uses for its operations and investments, categorized as debt or equity.

A company's decision-making process for allocating its capital to investments with the goal of maximizing shareholder value.

A distribution of a company's profits to its shareholders, usually paid on a per-share basis.

A company's decision to pay dividends is influenced by its profitability, cash flow, financial health, and growth prospects.

A company's dividend policy outlines key decisions like how often dividends are paid, when they are paid, and how much is paid to shareholders.

Companies may offer shareholders the option to receive dividends in cash or reinvest them in additional shares through a dividend reinvestment program (DRIP).

Mature companies with stable businesses may be more likely to issue dividends because they don't need as much cash for growth.

Growth-oriented companies in capital-intensive sectors (e.g., technology) might prefer to reinvest their earnings for future growth.

Consistency is important to investors. They prefer knowing they'll receive a consistent amount each period, rather than fluctuating amounts.

Some investors may prefer the potential for higher dividends, even if it means accepting the risk of sometimes receiving lower amounts.

A strategy to pay a steady dividend each year, regardless of earnings fluctuations. Aims for predictable payouts, appealing to investors seeking regular income.

A company pays a fixed percentage of its earnings as dividends, making payouts volatile depending on earnings performance. Offers full earnings exposure for investors.

Dividends are paid only after covering all capital expenditures and working capital needs. Prioritizes business operations and investment.

Companies choose not to pay dividends, reinvesting profits into growth opportunities like research, acquisitions, or debt reduction.

Combines elements of different dividend policies, offering flexibility and tailored payouts to suit specific company needs.

Prioritizes a stable dividend payment, even if earnings are low. Offers investors predictable income and confidence in long-term growth.

Exposes investors to full earning volatility, offering potentially higher returns but also risking dividend cuts during downturns.

Prioritizes reinvestment into the business, potentially leading to higher future growth and shareholder value through stock appreciation.

A company's plan for how and when it will pay dividends to its shareholders.

The practice of combining two companies into one, either through a merger or an acquisition.

A type of M&A where one company takes over another, becoming the new owner.

A type of M&A where two companies combine to form a new entity, rather than simply one taking over the other.

A type of acquisition where the target company doesn't want to be acquired. Often happens when the acquiring company makes a hostile takeover bid.

The process of one company offering to buy the shares of another company from its shareholders, usually at a premium to the current market price.

A merger where both companies are roughly the same size, and neither company is deemed the dominant partner.

The financial institutions or divisions that specialize in facilitating or managing mergers and acquisitions.

A framework of rules, practices, and processes that guide how a company is run and controlled.

It encompasses a broad range of aspects, including action plans, internal controls, performance measurement, and how the company communicates its activities to the public.

A board of directors plays a key role in setting the company's direction and overseeing management. Shareholders have a voice in how the company is run through voting and engagement.

Good corporate governance builds trust and transparency. It promotes long-term financial stability, attracts investors, and helps a company navigate ethical and social issues.

Transparent rules and controls, aligned interests of stakeholders, and responsible leadership are key elements of strong corporate governance.

The board of directors is directly responsible for overseeing corporate governance. Their decisions and actions impact the company's direction, operations, and value.

Effective communication of the company's governance practices builds investor confidence and demonstrates commitment to responsible business practices.

Good corporate governance can translate to higher share prices, as investors recognize the value of responsible business practices.