Explain the difference between "profitability" and "cash flow."
What will be an ideal response?
Some firms are borrowing constrained. Their only source of funds to buy investment is current profit. So, when current profit rises, those borrowing constrained firms increase investment. This summarizes how "cash flow" can affect a firm's investment decision. "Profitability" simply refers to how changes in the expected present value of future profits affect investment.
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The academic dean at Esoteric University hires a philosopher to teach one of the 12 sections of a course called "Why Nerf Balls Ingest Hair." Which of the following is true?
a. The academic dean is the agent; the philosopher is the principal. b. The academic dean is the agent; the students are the principals. c. The academic dean is the principal; the students are the agents. d. The philosopher is the principal to both the academic dean and the students. e. The philosopher is an agent to both the academic dean and the students.
Since rent controls have been in effect in New York City, apartments have been more plentiful.
Answer the following statement true (T) or false (F)