Investors and Banks Use Financial Statements to Determine Whether to Invest

question 80

True/False

Investors and banks use financial statements to determine whether to invest in or loan capital to the firm.

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Definitions:

Par Value

The nominal or face value of a bond, share of stock, or other financial instrument, as stated by the issuing company.

Net Income

The amount of profit left after all operating expenses, interest, taxes, and dividends have been deducted from total revenue.

Dividend Payout Ratio

The dividend payout ratio is the fraction of net income a firm pays to its stockholders in dividends, expressed as a percentage, showing the percentage of earnings distributed as dividends.

Market Price

This represents the price at which a commodity, security, or other financial instrument is traded on the open market and can be purchased or sold.