When Selecting the Weights to Be Used in WACC Calculations

question 13

Multiple Choice

When selecting the weights to be used in WACC calculations which values should be used?

• A) Risk free values
• B) Capitalised values
• C) Market values
• D) Balance sheet values

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Definitions:

Gross Method

An accounting method where purchases and sales are recorded at their gross amounts before any trade discounts are taken into account.

Credit Terms

The agreed upon conditions between a buyer and a seller regarding the amount and timing of payment for goods or services.

Periodic Inventory System

An inventory system where stock levels and cost of goods sold are calculated at the end of an accounting period, rather than updated continuously.

Net Method

An accounting method that records purchases after deducting any available discounts, directly showing the net purchase cost.