Practice Quiz WACC

What is the primary purpose of computing the cost of capital? a. To determine the market value of the company's shares b. To assess the company's liquidity position c. To evaluate the profitability of investment projects d. To compare the company's performance with industry peers

Cost of capital refers to: a. The cost of borrowing money from financial institutions b. The cost of equity investments in the stock market c. The overall cost of financing a company's operations d. The cost of producing goods and services

The cost of equity is ________.   a.equal to the amount of asset turnover b.the interest associated with debt c.the weighted average cost of capital d.the rate of return required by investors to incentivize them to invest in a company

The company cost of capital: measures the return that investors require from the company. is measured using security book values. depends on historical profits and cash flows. O depends on current profits and cash flows.

Which of the following statements is correct? Select one: A. Working capital is the initial capital injected into a company. OB. Working capital is equal to the net investment in current assets and current liabilities. C. Working capital is the minimum amount of capital required to run a business. OD. Working capital is a source of long-term finance.

Capital Structure: Describes the percentage breakdown of a firms’ assets vs. their debt (financing activities). T/F

A. Which of the following is most closely associated with the cost of using assets? a. Asset utilization b. Sales revenue c. Proportion of debt and equity d. Average price   B. Which of the following is most closely associated with the return on management’s use of assets? a. Cost of capital b. Mix of equity types c. Prime lending rate d. # of products sold

a. What is meant by a company's cost of capital? b. Why is the company's cost of capital critical in the financial decisions that management must make?

Which of the following should be used when calculating the weights for a company's capital structure? OA. Historic accounting values OB.Book values OC. Current market values OD. Par and face values

Networking capital refers to the    A) firms investment in total assets B) firms' investment in current assets C) difference between the firm's current assets and its current liabilities  D) Difference between the firms total assets and its total liabilities

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