A Firm That Does Not Earn the Cost of Capital

question 75

True/False

A firm that does not earn the cost of capital in the short run will probably be in bankruptcy.
Proper management of the sources of capital can allow a firm to survive short-term interruptions in its income stream.

---

Definitions:

Management Prediction

Forecasts or projections made by a company's management regarding future business conditions, operational performance, or financial outcomes.

Creditor Evaluation

The process of assessing the creditworthiness of a business or individual, analyzing their ability to repay debts.

Operating Activities

Operating activities involve the primary revenue-generating activities of a business, such as sales and delivery of goods/services, and are reflected in the cash flow statement.

Credit Sales

Transactions in which goods or services are provided to a customer with the agreement that payment will be made at a future date.