Which of the Following Is Not Considered a "Cost" of Extending

question 78

Multiple Choice

Which of the following is not considered a "cost" of extending credit to customers?

• A)The opportunity cost of lost interest
• B)Keeping the records for accounts receivable
• C)The increased sales resulting from the extension of credit
• D)The possibility of unpaid accounts

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Definitions:

Discount Rate

The rate of interest utilized to calculate the current value of future cash flows within discounted cash flow analysis.

Cost of Capital

A company's expense for acquiring funds and capital, calculated as a weighted average of debt and equity costs.

Debt-Equity Ratio

A measure of a company's financial leverage calculated by dividing its total liabilities by stockholders' equity; it indicates what proportion of equity and debt the company is using to finance its assets.

Levered Firm

A company that has debt in its capital structure, showing that it finances some of its operations through borrowing.