The Use of the Funds Is More Important Than the Source

question 368

True/False

The use of the funds is more important than the source of funds in determining the cost of capital.

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Definitions:

Physical Capital

Manufactured items used to produce goods and services; includes new plants and new equipment.

Petty Cash

A small amount of cash on hand that is used for paying minor or incidental expenses in a business.

Free Goods

Items or services available in abundance without direct cost, such as air or sunlight, not requiring scarce resources for their production.

Scarce Resources

Refers to the limited availability of inputs—such as labor, capital, and raw materials—used in the production of goods and services.