A Cosmetics Company Owns a Patent for a Particular Kind

question 5

Multiple Choice

 A cosmetics company owns a patent for a particular kind of shampoo, which is a bestseller in the market. It enables the firm to extract a high level of discretion over product pricing. The patent for the shampoo is an example of a firm's _____ resource.

• A) tangible
• B) human
• C) natural
• D) intangible

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Definitions:

Capital Structure

Capital Structure refers to the mix of debt and equity financing a company uses to fund its operations and growth.

M&M Proposition I

A principle of corporate finance stating that, under certain conditions, the value of a company is not affected by how it is financed, regardless of whether the company is financed by debt or equity.

Value of the Firm

The total worth of a company based on its current market capitalization plus any debts, and minus any cash on the company's balance sheet.

Interest Tax Shield

The decrease in income tax liabilities due to permitted interest expense deductions.