Corn and Soybeans Are Alternatives That Could Be Grown by Most

question 48

Multiple Choice

Corn and soybeans are alternatives that could be grown by most farmers. If government subsidies for ethanol lead to higher corn prices, this will

• A) increase the supply of corn.
• B) increase the supply of soybeans.
• C) decrease the supply of soybeans.
• D) decrease the supply of corn.
• E) have no effect on the supplies of corn and soybeans.

Distinguish between the periodic and perpetual inventory systems.

Calculate and interpret liquidity ratios and understand their significance.

Recognize the purpose and calculation method of the acid-test ratio.

Master the procedure for recording merchandise transactions under the perpetual inventory system.

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Definitions:

Cost of Debt Financing

The total expenses a company incurs in order to borrow money, including interest payments, transaction fees, and any other associated costs.

Business Risk

The exposure to factors that can lead to a reduction in the value of an investment or in the revenues of a business.

Systematic Risk

A risk that influences a large number of assets. Also called market risk.

Optimal Capital Structure

The best mix of debt and equity financing that minimizes the company's cost of capital and maximizes its value.