Investments in Debt and Equity Securities That Cannot Be Readily

question 120

Multiple Choice

Investments in debt and equity securities that cannot be readily classified in the other reporting categories are classified as ________.

• A)securities available for sale
• B)trading securities
• C)held to maturity securities
• D)minority securities

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Definitions:

ROE

Return On Equity represents a financial performance metric that is obtained by dividing a company's net income by its shareholders' equity, demonstrating the company's effectiveness in using investor funds to grow earnings.

EPS

Earnings Per Share, a key indicator of a company's profitability, calculated by dividing the company's net income by its total number of outstanding shares.

DFL

Degree of Financial Leverage, a ratio measuring the sensitivity of a company's earnings per share to fluctuations in its operating income, due to changes in its capital structure.

Optimal Capital Structure

The most favorable blend of debt and equity financing that minimizes a company's cost of capital while maximizing its market value.