Question

Q5. Efficient markets and current asset

Briefly explain why the following statements are true or false. That is, first state whether the statement is true or false, but the crux of the matter is, why is the statement true or false?

1. All things equal, a bond with a call feature will pay lower interest than one without;
2. A market that is strong-form efficient will also be semi-strong-form efficient;
3. If you quit your job as a plumber and open a vegetable and fruit stand, you will likely find that the length of the credit period you get from suppliers of fresh vegetables and fruits will be shorter;
4. There are advantages to having substantial current assets on hand;
5. There are disadvantages to having substantial current assets on hand.

Answer 1

1.All things equal, a bond with a call feature will pay lower interest than one without; = False

Reason : A callable bond benefits the issuer, and so investors of these bonds are compensated with more attractive interest rate than on otherwise similar non- callable bonds.

2.A market that is strong-form efficient will also be semi-strong-form efficient; = TRUE

Reason :

If a market is strong form efficient, then it is also semi strong and weak form. since all available information includes past prices and publicly available information.

3.If you quit your job as a plumber and open a vegetable and fruit stand, you will likely find that the length of the credit period you get from suppliers of fresh vegetables and fruits will be shorter = True

Reason :

A credit period is the time frame between when a customer purchases a product and when the customer’s payment is due. In other words, this is the amount of time a customer has to pay for the product.

4.There are advantages to having substantial current assets on hand = TRUE

Reason : Substantial Assets means assets sold or otherwise disposed of in a single transaction or a series of related transactions representing 25% or more of the consolidated assets of the Borrower and its Consolidated Subsidiaries, taken as a whole.

Most companies have credit policies set up with vendors or customers, so purchases can be made on account. These credit purchases help speed up commerce and increase sales because it allows customers to purchase items before they actually have the funds to buy the products.

Before a credit sale can be made, credit terms must be established. 2/10 N/30 is the standard term for transactions across almost all industries. This means that if the customer pays for the product within ten days he gets a 2 percent cash discount. If the discount isn’t taken, the customer must pay the full invoice price within 30 days from the purchase. This 30-day time frame is considered the credit period. It’s the amount of time the seller is giving the buyer credit for the transaction.

5.There are disadvantages to having substantial current assets on hand.= TRUE

Reason : Substantial Assets means assets having a fair market value that, or assets to be acquired for a consideration that, equals or exceeds 10% of the amount of the Consolidated Tangible Net Assets of the Company, as reflected on the most recent audited consolidated balance sheet of the Company existing at the time the Board makes the determination whether or not to approve, adopt or authorize the Significant Transaction involved. The term "Consolidated Tangible Net Assets" means, as of any date of determination, the amount of total assets on a consolidated balance sheet of the Company, determined in accordance with generally accepted accounting principles in