**1. If workers or businesses anticipate that an expansionary monetary policy will increase inflation, the effects of this policy on real output will be which of the following? Mainstream economics defend the concept of green growth and consider that manufacturers are the most relevant actors to develop innovative solutions and cleaner production that could address the challenges of climate . As time to maturity increases, bond price sensitivity decreases. Several policies have been proposed to counteract the harms of horizontal shareholdings. The major difficulty in most insider-trading cases has been that inside trades have not been legally well-defined. an insurance product designed to protect financial institutions from customers who default on their loans. D. optimally increasing the long-term value of the firm is emphasized. C.created more pressure on public companies to manage their firms more efficiently. ** A college received a$200,000 contribution that the donor restricted to acquiring fixed assets. Pressure to increase current asset buildup often results from, Working capital management is primarily concerned with the management and financing of, The term "permanent current assets" implies, If a firm uses level production with seasonal sales, Normally, permanent current assets should be financed by, U.S. government securities are used to construct yield curves because, The theory of the term structure of interest rates, which suggests that long-term rates are determined by the of short-term rates expected over the time that a long-term bond is outstanding, is the, Some analysts believe that the term structure of interest rates is determined by the behavior of various types of financial institutions. Character, quality, and degree of institutional investor engagement across the globe vary widely because of the different categories of institutional investors and their business models. 77.The increasing percentage ownership of public corporations by institutional investors has A.had no effect on corporate management. that inside trades have not been legally well-defined. Retail investors are real people. A study by Ernst & Young found that as recently as 2010 just 6 percent of S&P 500 companies reported investor engagement. The increasing percentage ownership of public corporations by institutional investors has. Save my name, email, and website in this browser for the next time I comment. Our data shows that Steven Urvan is the largest shareholder with 17% of shares outstanding. Large-scale corporate engagement is still a relatively new phenomenon for many institutional investors. \end{array} \text { November } & 4,000,000 \\ The bank requires a 20% compensating balance. **5. But if both food trucks were instead owned by the same group of local investors, these owners would not support one truck cutting its prices because it would simply shift business from one outlet to another, with a lower total profit to the investors. Institutions with the highest degree of engagement typically have no regulatory obligation with respect to the degree of their ownership engagement. The results show that this shareholding significantly . What is the expected value or return? c. created more pressure on public companies to manage theirfirms more efficiently. | Net income | 2,457 | ** What is the total amount of assets invested in Research In Motion? Meanwhile, the second and third largest shareholders, hold 6 . Last week's US$3.4b market cap gain would probably be appreciated by institutional investors, especially after a year of 35% losses. ** How much are total expenses for Research In Motion for the year ended February 27, 2010? | $0.2$ | $1.30$ | $1.45$ | $1.45$ | But it is near-costlessfor index funds to influence a firm to behave anti-competitively through voting on general corporate governance matters that apply to all corporations in their portfolio. Private companies have no shareholders. In this case, which of the following statements is true? b. created higher returns for the stock market in general. \text { Month } & \text { Amount } \\ A ground-breaking studyfound that the degree to which airlines serving a particular route are commonly owned is correlated with ticket prices on these routes (controlling for possible confounding factors). previous. This has led to lots of issues for corporations, from reduced transparency, to what the SEC calls material misstatements and/or omissions, to having shareholders have to take action against the corporation itself. D. taken away the voice of the individual investor. Which of the following is not a true statement about the goal of maximizing shareholder, 83. Since the 1980s anti-trust policy has focused on one goal: consumer welfare. It presents a global overview of ownership of different categories of . ** What is Research In Motions return on assets? **2. C In fact, in many of these industries common ownership is even higher than it first appears because some large stockholders, such as J.P Morgan Asset Management, may be owned in part by other institutional owners. The common characteristic is that institutional investors are not physical persons; instead they are legal entities. allowed firms such as McDonald's to raise capital around the world. The discount rate depends on the market's perceived level of risk associated with an individual security. The higher the interest rate used in determining the future value of a $1 annuity, A dollar today is worth more than a dollar to be received in the future because. If States were not required to give full faith and credit to the public acts, records, and judicial proceedings of other States, what problems would arise? Which of the following would not be included in the balance sheet investment account? The statement of cash flows does not include which of the following sections? $$ MULTIPLE CHOICE QUESTIONS 5 POINTS EACH 1 The increasing percentage ownership of. T/F. \end{array} See below and advise:4. C. created more pressure on public companies to manage their firms more efficiently. . So they generally do consider buying larger companies that are included in the relevant benchmark index. Of course, this sort of collusion is already likely to be prosecuted under current anti-trust practices. Overall, institutional investors (which may offer both active and passive funds) own 80%of all stock in the S&P 500. And although money managers at an institutional investor look after a relatively small portfolio, the shareholder voting rights of all funds within the institutional investor fund family are usually exercised jointly. The increasing percentage ownership of public corporations by institutional investors hasA. Your email address will not be published. There is a lot of buzz around the topic of institutional investor engagement in Asia. ***Fast Forward*** This textbook can be purchased at www.amazon.com, Chapter 01 - The Goals and Functions of Financial Management, 78. t/f A cash flow statement is considered correct if the change in cash flow plus the beginning balance ties to the ending cash balance. to pay a higher interest rate than its competitors. Their representation among the top 10 shareholders of U.S. corporations has . Its assets at February 28, 2009, equal$8,101 (in millions). U.S. sectors where concentration rose the most experienced the largest declines in the labor shareof firms profits. T/F, Fundamentals of Financial Management, Concise Edition, Don Herrmann, J. David Spiceland, Wayne Thomas, Financial Reporting and Analysis: Using Financial Accounting Information. In determining the cost of bank financing, which is the important factor? Estimate by least squares the linear regression of increase in sales on increase in advertising expenditure. This means that the potential beneficiaries of anti-competitive behaviour investors are often wealthier than the consumers who pay the higher prices.In fact, as the chart below shows, the increase in common ownerships from 1985 to 2015 coincides with the rise in wealth inequality. What should be the primary goal of financial management? A less drastic suggestion(but which would require new legislation) is to take away tax advantages enjoyed by retirement funds that are invested in mutual funds with a significant number of shares in more than one firm in an industry. \ ** Does Research In Motions return on assets seem satisfactory if competitors average an 18% return? Required fields are marked *. ** A college made loans of $100,000 to students and faculty. Each year, on his birthday, you make another deposit. CFA. Institutional investors have grown so much because they offer small-scale savers the opportunity to invest in diversified funds with economies of scale. However, low-quality stocks must usually be sold in secondary markets, such as NASDAQ. C. 11, OECD Publishing. Forecast for assumption 1 (low fuel prices): C. created more pressure on public companies to manage their firms more efficiently. The present selling price is $42 per unit. Fears of the economic, political, and social harms of concentrated economic power have been narrowed in anti-trust jurisprudence to questions about how consumers are affected. A recentblog post on shareholder engagementhighlights global trends in boardshareowner engagement. Under which of the following conditions could the overuse of financial leverage be detrimental to the firm? As mergers, acquisitions, and restructuring have increased in importance, agency theory has become more important in assessing whether shareholder goals are truly being achieved by managers in the long run. If a firm has both interest expense and lease payments, Disinflation as compared to inflation would normally be good for investments in, The most rigorous test of a firm's ability to pay its short-term obligations is its. This is especially problematic for the most well-known publicly traded companies, Microsoft, Walt Disney, and Netflix, for example. The increasing percentage ownership of public corporations by institutional investors has. Under tight money conditions (30% probability), Plan A will produce $40,000 less than Plan, Frank's sporting goods projects sales for the second quarter of 20x5 to be as follows: April $100000 May $120000 June $110000. The report defines asset managers (as opposed to asset owners) as having the day-to-day responsibility of managing investments; they are not expected to invest in their own name but directly in their clients name and based on their clients investment policy. account. Which of the following would represent a use of funds and, indirectly, a reduction in cash balances? Some arguethat any horizontal shareholdings calculated to result in highly concentrated industries should be investigated for their effects on consumer prices. someone has information not available to the public which they use to profit from trading in stocks. | $0.3$ | $\$ 1.20$ | $\$ 1.50$ | $\$ 1.70$ | Several studies have found clear empirical evidence that anti-competitive horizontal shareholdings lead to increased consumer prices. Mr. Hoffman has come up with two possible forecasts as shown next-each of which he feels has about a 50 percent chance of coming true. On November 12, 2014, the company received an offer from Dawkins Company for 18,000 units of the product at$32 each. Horizontal shareholding does not result in increased efficiencies to firms, unlike standard mergers, because operations are not combined to create economies of scale. Under assumption number 1 , diesel prices will stay relatively low; under assumption number 2, diesel prices will rise considerably. After World War II, however, institutional ownership started to increase, and by 1980, institutions held $473 billion, or 34%, of the total market value of U.S. common stocks. The increasing percentage ownership of public corporations by institutional investors has created more pressure on public companies to manage their firms more efficiently. Proxy firms could also shield indexes from the indirect costs of their efforts (aggravating corporate managers and causing them to divert their corporations pension assets to other funds), since the indexes are simply following the proxys guidance. The Canadian Securities Administrators have proposed some major changes. A major focus of the __ is to make sure that publicly traded companies accurately present their assets, liabilities, and income in their financial statements. Theory and evidence suggests that horizontal shareholding harms competition, consumers, and the economy. 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