The Cash Flows Associated with Common Stock Are More Difficult

question 89

True/False

The cash flows associated with common stock are more difficult to estimate than those related to bonds because stock has a residual claim against the company versus a contractual obligation for a bond.

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Definitions:

Dividend Yield Ratio

A financial ratio that indicates how much a company pays out in dividends each year relative to its stock price.

Market Price

The current price at which an asset or service can be bought or sold in the marketplace.

Stock Split

An action by a company to divide its existing shares into multiple shares to boost the liquidity of the shares.

Par Value

The nominal value per share of stock as specified in the corporate charter; also, another name for bond principal, or the maturity amount of a bond (in Chapter 10).