When Stock Market Values Are Relatively High

question 124

Multiple Choice

When stock market values are relatively high:

• A) you will tend to observe more IPOs and new stock issuances.
• B) you will tend to observe more bond issuances.
• C) you will tend to observe firms raising more money from venture capitalists.
• D) you will tend to observe firms borrowing more money from banks.

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Definitions:

Economic Value Added

A measure of a company's financial performance based on the residual wealth calculated by deducting its cost of capital from its operating profit.

Residual Income

Another term for economic value added (EVA).

Opportunity Costs

The cost of foregone alternatives when a decision is made, representing the benefits an individual, investor, or business misses out on when choosing one alternative over another.

Economic Value Added

A measure of a company’s financial performance that calculates the value created beyond the required return of the company’s shareholders.