The Law of Conservation of Value Implies That

question 59

Multiple Choice

The law of conservation of value implies that

• A)the mix of senior and subordinated debt does not affect the value of the firm.
• B)the mix of convertible and nonconvertible debt does not affect the value of the firm.
• C)the mix of common stock and preferred stock does not affect the value of the firm.
• D)the mix of senior and subordinated debt does not affect the value of the firm, the mix of convertible and nonconvertible debt does not affect the value of the firm, and the mix of common stock and preferred stock does not affect the value of the firm.

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Definitions:

Consolidation Worksheet

A tool used in the preparation of consolidated financial statements that helps in adjusting and eliminating the financial information of the parent company and its subsidiaries.

Totals and Subtotals

Sums presented in financial statements or reports that represent the aggregation of financial data, with subtotals used to group related items together under a common category.

Dividends Payable

Refers to the amount of dividend that a company has declared to distribute to its shareholders but has not yet paid out.

Ex-dividend Basis

A stock trading status indicating that the security is sold without the right to receive the next dividend payment.