The Capitalization Rate When Figuring Goodwill Should Be a Figure

question 17

Multiple Choice

The capitalization rate when figuring goodwill should be a figure assigned to show ______.

• A) risk and expected growth rate of future earnings
• B) risk and profit minus taxes
• C) expected growth rate and profit
• D) expected growth rate and the value of tangible assets

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Definitions:

Carrying Costs

Expenses incurred by holding inventory over a period, including storage costs, insurance, and opportunity costs.

Credit Policy Effects

The impact of a company's credit policy on its operations, including effects on sales volume, customer relationships, and cash flow.

Cost Factor

A multiplier or rate that helps in estimating the cost of a project, task, or operation based on certain parameters or variables.