For Capital Budgeting and Cost of Capital Purposes,the Firm Should

question 24

True/False

For capital budgeting and cost of capital purposes,the firm should always consider retained earnings as the first source of capital (i.e. ,use these funds first)because retained earnings have no cost to the firm.

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Definitions:

LIFO

Last In, First Out, an inventory valuation method where the most recently produced items are recorded as sold first.

Falling Prices

A situation where the general level of prices for goods and services decreases over time.

LIFO Method

An inventory valuation method that assumes the last items added to inventory are the first ones to be sold (Last In, First Out).

Periodic Inventory System

An inventory valuation method where the ending inventory and cost of goods sold are determined at the end of the accounting period.