Why Should Managers Assume They Will Receive a Fair Price

question 110

Multiple Choice

Why should managers assume they will receive a fair price for any new shares that their firm issues?

• A) All new shares must sell at par value.
• B) All new shares will sell as positive NPV investments.
• C) Financial markets are highly competitive.
• D)New share prices are highly regulated.

Comprehend the role of accrual accounting earnings in predicting future cash flows.

Appreciate the importance of risk evaluation in determining discount rates for future cash flows.

Understand the creation and use of pro forma financial statements in business analysis.

Recognize the relevance of earnings numbers in estimating sustainable long-term cash flows.

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Definitions:

Continuous Quality Improvement

A systemic and persistent effort to make incremental improvements in processes and systems to enhance quality.

Continuous Improvement

A continuous endeavor aimed at enhancing products, services, or processes through both minor and major advancements.

Crosby's 'Four Absolutes'

A quality management philosophy emphasizing prevention over inspection, zero defects as the quality standard, quality measurement, and the quality performance standard must be zero defects.

Deming's '14 Points'

A set of management practices introduced by W. Edwards Deming to help organizations increase quality and productivity.