You read the balance sheet of Rivian and discover that the book value of equity is negative. Yet, its market capitalization (= $ value of a share times number of shares outstanding) is positive. What can you conclude?

(2 Points)

The book value of equity and its market value are typically different, this is not uncommon.

There is an error on the balance sheet, this is not possible, the market value should be equal to the book value at all times.

The market is mispricing the stock of Rivian.

2

Highlight a way to boost your dollar sales.

(2 Points)

Lower the average collection period at given accounts receivables.

Increase accounts receivables... even if the average collection period increases in % by more than the accounts receivables.

Lower the CGS and the SG&A.

3

A firm's book value of equity is unchanged. It issues $50M of corporate bonds, and uses it to purchase a $50M building. The net income of the firm is unchanged. Therefore...

(2 Points)

The return on equity increases, the return on assets is unchanged.

The return on equity is unchanged, the return on assets increases.

The return on equity increases and the return on assets declines.

The return on equity is unchanged, the return on assets declines