Which of the Following Statements Is Correct

question 63

Multiple Choice

Which of the following statements is correct?

• A)A decrease in the firm's marginal corporate tax rate will decrease the weighted average cost of capital.
• B)Flotation costs can decrease the weighted average cost of capital.
• C)The cost of debt is based on the cost of all liabilities, including accounts payable and accruals.
• D)None of these statements is correct.

Comprehend the effects of issuing and repaying debt on a statement of cash flows.

Recognize the significance of free cash flow as an indicator of financial health.

Understand the relevance of cash equivalents and their reporting on the statement of cash flows.

Discern the principle of double-entry bookkeeping as it applies to changes in cash balance reported on the statement of cash flows.

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Definitions:

Capital Balance

The amount of money that owners have invested in a company, not including any profits or losses.

Natural Business Year

A fiscal year that ends when a company's sales are at their lowest point in their annual cycle.

Fiscal Year

A one-year period used for financial reporting and budgeting, which does not necessarily coincide with the calendar year.

Business Activities

Various operations, tasks, and functions carried out by a company in pursuit of its economic goals.