The Purchase of Shares with Cash in the Hope of Earning

question 7

Multiple Choice

The purchase of shares with cash in the hope of earning a capital gain is known as taking a

• A) long, margined position in the share.
• B) long position in the share.
• C) short, margined position in the share.
• D) short position in the share.

Grasp the differences in cash flow considerations between expansion, new ventures, and replacement projects.

Understand the significance of tax deductible expenses and their effect on initial outlay.

Acknowledge the necessity of including both variable and fixed costs in project cash flows according to the incremental cash flow principle.

Understand how to calculate and interpret the tax effects of selling an asset.

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Definitions:

Common Stock Dividends Distributable

An amount declared by a company’s board of directors to be distributed to common stockholders, recorded as a liability until paid.

Paid-in Capital

The amount of capital "paid in" by investors during common or preferred stock issuances, including the par value of the shares.

Stock Dividends

A distribution of a company's earnings to shareholders in the form of additional shares, rather than cash.

Stock Split

A corporate action in which a company divides its existing shares into multiple shares to boost the liquidity of the shares, although the overall value of the company does not change.