A Disadvantage of Corporations Is That Their Charters Are Only

question 337

True/False

A disadvantage of corporations is that their charters are only valid for 99 years, so corporations are less permanent than other types of businesses.

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Definitions:

Cost of Capital

The obligatory profit percentage a corporation needs to achieve on its investments to keep its market share and attract investors.

IRR

Internal Rate of Return; a financial metric used to evaluate the profitability of investments, representing the discount rate that makes the net present value (NPV) of all cash flows equal to zero.

Net Cash Flows

The difference between a company's cash inflows and outflows during a specific period, representing its ability to generate value.

Depreciation

The accounting entry allocating the cost of a long-lived asset against income over the asset’s life. Depreciation is a noncash charge, so net income is generally less than true cash flow by at least the amount of depreciation.