Which of the Following Is True About Current Cost Method

question 15

Multiple Choice

Which of the following is true about current cost method and market value method?

• A) They are used by the BEA to place current values on foreign indirect investments.
• B) These methods lead to the same valuations.
• C) Based on the current cost method, the BEA's 2009 estimate of U.S. net foreign wealth was $2,737.86 billion.
• D) The current cost method is preferred by the BEA.
• E) Foreign direct investments of the U.S. are valued at their original purchase price.

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Definitions:

Operating Leverage

A measure of how revenue growth translates into growth in operating income, indicating the proportion of fixed to variable costs a company has.

Capital Structure

The mix of various forms of external financing used by a firm, including debt and equity, to fund its overall operations and growth.

Fixed Costs

Costs that remain constant regardless of the amount of goods produced or sold, including items like rent, salaries, and insurance fees.

Variable Costs

Costs that vary directly with the level of production or sales, such as materials and labor.