Question

The net new equity raised by a firm during a given year can be calculated as:

	a.	New equity sales minus equity repurchases plus retained earnings minus dividends paid.
	b.	New equity sales plus retained earnings.
	c.	New equity sales minus dividends paid.
	d.	New equity sales minus equity repurchases plus retained earnings.
	e.	New equity sales minus equity repurchases.

What is the proper measure of cash flow to creditors in a given year?     a.   Interest paid minus net new borrowing.     b.   Interest paid plus net new borrowing minus additions to net fixed assets.     c.   Operating cash flow minus net new borrowing.     d.   Interest paid plus changes in long-term debt.     e.   Interest paid.

Answer 1

The answer of 1st question is option - E) New equity sales minus equity repurchases.

(Net new equity is simply calculated as the increase in owner's equity during the year, other than retained earnings)

The answer of 2nd question is option - A) Interest paid minus net new borrowing.

(cash flow to creditors simply means net payments to creditors and owners during the year)

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