Work by Amihud and Mendelson (1986,1991)

question 51

Multiple Choice

Work by Amihud and Mendelson (1986,1991)

• A)argues that investors will demand a rate of return premium to invest in less liquid stocks.
• B)may help explain the small firm effect.
• C)may be related to the neglected firm effect.
• D)B and C.
• E)A,B,and C.

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Definitions:

Comparative Balance Sheet

Financial statements that present the balances of assets, liabilities, and equity at different points in time for comparison purposes.

Indirect Method

An approach to report cash flows from operating activities on the cash flow statement, adjusting net income for changes in non-cash accounts.

Operating Activities

Activities that constitute the primary or main operations of a company, including sales, service, and administrative functions, as reflected in the cash flow statement.

Cash Flow Ratio

A financial metric that measures a company's ability to cover its obligations with cash from operating activities, indicating its liquidity position.