You Make the Call-Situation 3

question 11

Essay

You Make the Call-Situation 3
Siblings Rob, 37, and Julie, 36, work in their family's $15 million medical products firm. Both are capable leaders and have experienced success in their respective areas of responsibility. Compared to Julie, Rob is more introverted, more thorough in his planning, and much better on detail and follow through. In contrast, Julie is more creative, more extroverted, and stronger in interpersonal skills. Since childhood, they have been rather competitive in their relationships. Their 62-year-old father is contemplating retirement and considering the possibility of co-leadership, with each child eventually holding a 50-percent ownership interest.

Understand the impact of insider trading and regulatory disclosures on market efficiency.

Assess the performance of mutual funds and the implications for investment choice.

Interpret the results of empirical research studies on market efficiency and stock performance.

Distinguish between the three forms of market efficiency and their information sets.

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Definitions:

Income Summary

An account used in the closing process that summarizes the results of operations by collecting all revenue and expense account balances before determining the net income or loss.

Retained Earnings

The cumulative amount of profits that have been reinvested in the business rather than distributed to shareholders as dividends.

Dividends

Dividends disbursed to members holding shares in a corporation, generally originating from the profits of the business.

Salary Expense Accrual

An accounting practice of recognizing salary expenses incurred in a period that has not yet been paid out in order to accurately reflect the company's liabilities.