What is the market value of a financial asset? The future value of all future pr
ID: 461047 • Letter: W
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What is the market value of a financial asset? The future value of all future profits The present value of all future profits The future value of all future cash flows The present value of all future cash flows According to DuPont analysis return on equity (ROE) consists of gross profits x equity margin return on assets x debt ratio profit margin x asset turnover ROA/(1 - Debt/Assets) Contractual capacity is the ability to read and write sign a written contract. understand that a contract is being made and to understand its general nature understand the legal meaning of the contract being made The party in a quasi-contractual (unjust enrichment) action can recoverExplanation / Answer
49. The answer is "the present value of all future cash flows". A financial asset like a stock or a security represents a claim against the future cash flows generated from the asset. For determining the current day market value, the free cash flows are projected for future and are discounted using the cost of capital to determine the present value of these cash flows. This present value is the market value of the financial asset.
50. As per the DuPont analysis, ROE = profit margin (profit/sales) * assets turnover (sales/assets)* equity multiplier (assets/equity).
Hence the ROE consists of "profit margin * assets turnover".
51. Contractual capacity is the legal ability to form a valid or a binding contract. Classes of people like minors or mentally challenged people are not able to understand the legal meaning of the contract being made and so they don't have contractual capacity. So the answer is "understand that a contract is being made and to understand its general nature". Contractual capacity defines the minimum mental capacity required for entering into a contract.
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