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One Criticism in Using the CAPM to Calculate the Cost

question 45

Short Answer

One criticism in using the CAPM to calculate the cost of equity capital is that ______________________________ and the __________________________________________________ are quite sensitive to the time period and methodology used in their computation.


Definitions:

Refund Liability

An obligation recorded on the company's balance sheet, representing the expected refunds to customers for returns or dissatisfaction over a period.

Estimated Inventory Returns

The estimated amount of goods a company predicts will be returned by customers after purchase.

Liability Account

An accounting record that tracks the monies owed by a company to outside parties or obligations that will result in future outflows of resources.

Revenue Account

An account that tracks the income generated from normal business operations over a certain period.

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