Koonce Office Supplies Balance Sheet December 31, 2017 Cash $ 195,000 Accounts payable $ 210,000 Accounts receivable 150,000 Salaries and wages payable 30,000 Inventory 165,000 Mortgage payable 240,000 Prepaid insurance 90,000 Total liabilities $480,000 Stock investments (Short-Term) 255,000 Land 270,000 Buildings $315,000 Common stock $360,000 Less: Accumulated Retained earnings 750,000 depreciation (60,000) 255,000 Total stockholders’ equity $1,110,000 Trademarks 210,000 Total liabilities and Total assets $1,590,000 stockholders’ equity $1,590,000 10. What is the total dollar amount of assets to be classified as current assets? a. $855,000 b. $600,000 c. $510,000 d. $435,000
Cost of Capital
Shareholders and investors who invest into the capital of the firm desire to have a suitable return on their investment funding. The cost of capital reflects what shareholders expect. It is a discount rate for converting expected cash flow into present cash flow.
Capital Structure
Capital structure is the combination of debt and equity employed by an organization in order to take care of its operations. It is an important concept in corporate finance and is expressed in the form of a debt-equity ratio.
Weighted Average Cost of Capital
The Weighted Average Cost of Capital is a tool used for calculating the cost of capital for a firm wherein proportional weightage is assigned to each category of capital. It can also be defined as the average amount that a firm needs to pay its stakeholders and for its security to finance the assets. The most commonly used sources of capital include common stocks, bonds, long-term debts, etc. The increase in weighted average cost of capital is an indicator of a decrease in the valuation of a firm and an increase in its risk.
Koonce Office Supplies
Balance Sheet
December 31, 2017
Cash $ 195,000 Accounts payable $ 210,000
Inventory 165,000 Mortgage payable 240,000
Prepaid insurance 90,000 Total liabilities $480,000
Stock investments (Short-Term) 255,000
Land 270,000
Buildings $315,000 Common stock $360,000
Less:
Trademarks 210,000 Total liabilities and
Total assets $1,590,000 stockholders’ equity $1,590,000
10. What is the total dollar amount of assets to be classified as current assets?
a. $855,000
b. $600,000
c. $510,000
d. $435,000
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