What type of security is tax deductibility a characteristic

What type of security is tax deductibility a characteristic

Subject: Business    / Finance
Question
1.    What type of security is tax deductibility a characteristic?

2.    EPS dilution is a characteristic concern with equity (stock) or debt securities?

3.    Is the cost of debt financing higher or lower than equity financing? Why?

4.    Which type of financing, debt or equity, is risk greater? Why?

5.    Is the return on equity fixed or variable? Explain.

6.    Discuss financial ratios by stating their: (a) definition, (b) purpose, (c) broad types, (c) examples of some commonly used ratios, and how to use ratio analysis if the ratios do not necessarily follow the company or industry norm.

7.    Give an example of a negative ratio, an undefined ratio or a zero ratio, and what could make that occur.

8.    State and explain the correct descending order of priority of rights in the case of corporate liquidation.

9.    Define and discuss market efficiency and the difference between weak form efficient, semi-strong form efficient and strong form. Are most markets considered efficient?

10.    Most markets are considered semi-strong form efficient, which means you generally cannot make money trading on (a) _______________ information. (b) However trading on insider information can be lucrative. Fill in the space for (a) and explain your position according to the research literature for (b).

11. Define the “interest tax shield” and explain how it works with debt financing.

12.    What ratio is used to calculate the “interest tax shield?” Explain the ratio.

13.    When will an “interest tax shield” not help a company?

14.    Define beta, state what it measures, and explain its usefulness in determining the systematic or non-systematic risk of a security. Provide an example.

15.    State four pitfalls to avoid in the use of discounted cash flow analysis.

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