Which of the Following Statements About Total Capital Requirement Is

question 2

Multiple Choice

Which of the following statements about total capital requirement is least likely to be correct for a profitable firm?

• A)requirements remain constant over time
• B)seasonal variations are often experienced
• C)the trend is often upward-sloping
• D)a portion of working capital is permanent

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Definitions:

Cost of Capital

The rate of return that a company must earn on its investments to maintain its market value and satisfy its shareholders or debtholders.

Future Inflation

Anticipated increase in the price level of goods and services in the future, affecting purchasing power.

Market Risk Premium

The additional return an investor expects from holding a risky market portfolio instead of risk-free assets.

Cost of Equity

The return a company requires to decide if an investment meets capital return requirements, often based on the risk of investing in that company's equity.