I just need help with these two questions:
1. The difference between the historic price a firm paid and its going price among current buyers and sellers is the difference between its
a) market value and depreciation
b) book value and depreciation
c) market value and intrinsic value
d) book value and market value
2. Free cash flow is the available cash after _____ have been paid
a) creditors and shareholders
b) shareholders, creditors, and taxes
c) operating expenses, creditors, and taxes
d) operating expenses, taxes, and shareholders
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I have been stuck on these questions for over an hour now. I have looked through the chapter a few times and can't find anything. I was thinking that while I was taking notes, I must have missed something. So I kept on reading all the pages over and over and can't find anything.
I am thinking that the answers are:
1. D
2. C
Any help would be very much appreciated!
both my answers were correct
I can provide some guidance to help you arrive at the correct answers for these questions.
1. The difference between the historic price a firm paid and its going price among current buyers and sellers is the difference between its:
To determine the correct answer for this question, it's essential to understand the terms mentioned. Market value refers to the price at which an asset or security can be bought or sold in the current market. Depreciation, on the other hand, is the reduction in the value of an asset over time. Book value refers to the value of an asset as recorded in the company's financial statements. Intrinsic value refers to the fundamental or true value of an asset.
To answer this question, you need to identify the pair of terms that represent the difference between the historic price a firm paid and its going price among current buyers and sellers. In this case, the difference is between the price paid historically and the value in the current market. The term that represents the price paid historically is the book value. The value among current buyers and sellers is the market value. So, the correct answer is (d) book value and market value.
2. Free cash flow is the available cash after _____ have been paid:
To answer this question, you need to understand what free cash flow represents. Free cash flow is the amount of cash a company has available after all its operating expenses, taxes, and investments have been accounted for.
Let's evaluate the options:
a) Creditors and shareholders: This option only includes payment to creditors and shareholders, excluding taxes and operating expenses.
b) Shareholders, creditors, and taxes: This option includes payment to shareholders, creditors, and taxes, but does not mention operating expenses.
c) Operating expenses, creditors, and taxes: This option includes all the necessary components—payment to operating expenses, creditors, and taxes—making it a potential correct choice.
d) Operating expenses, taxes, and shareholders: This option includes all the necessary components but excludes payment to creditors.
Based on the above analysis, option (c) is the most accurate and complete answer as it includes the payment of all the different items: operating expenses, creditors, and taxes.
So, your answers are correct:
1. The correct answer is (d) book value and market value.
2. The correct answer is (c) operating expenses, creditors, and taxes.