With Regard to the Ongoing Expense of Long-Term Corporate Financing

question 160

Multiple Choice

With regard to the ongoing expense of long-term corporate financing, which of the following would be the least expensive?

• A) Long-term loans
• B) Corporate bonds
• C) Debenture bonds
• D) Ordinary share
• E) Trade credit

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Definitions:

Economic Profit

The financial gain achieved when revenues from business activity exceed the explicit and implicit costs of that activity.

Implicit Costs

Costs that represent the opportunity costs of using resources that the firm already owns, unlike explicit costs which involve direct monetary outlay.

Economic Loss

A decrease in financial wealth, goods, or resources, often as a result of business activities or economic policy decisions.

Accounting Profit

The net income a company reports on its financial statements, calculated as total revenues minus explicit costs.