For Information to Be of Real Value to a Manager

question 94

Multiple Choice

For information to be of real value to a manager, it must be accurate information. What is meant by accuracy?

• A) Accuracy means that the information must provide a valid and reliable reflection of reality.
• B) Accuracy means that information needs to be available in time for appropriate managerial action.
• C) Accuracy means that information must be communicated by using the right medium.
• D) Accuracy means that information should be analyzed.
• E) Accuracy means that information should be complete.

Recognize the bases for the component costs of capital.

Compare the cost of external equity with the cost of retained earnings and understand flotation costs.

Evaluate the conditions under which retained earnings should be considered the first source of capital.

Identify factors affecting the cost of capital and the decision to use debt or equity financing.

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Definitions:

Premium on Bonds Payable

This is the amount by which the selling price of a bond exceeds its face value or principal amount, typically because the bond's interest rate is higher than the current market rate.

Sold

Refers to the act of transferring ownership of goods or services from one party to another in exchange for money or other assets.

Interest Expense

The cost incurred by an entity for borrowed funds, often documented in the income statement as a non-operating expense.

Annual Payment

A sum of money paid or received once every year, often related to loans, leases, or annuity contracts, as part of the terms of agreement.