Two Equity Market Based Costs of Liquidity That Affects the Cost

question 36

Multiple Choice

Two equity market based costs of liquidity that affects the cost of capital are the:

• A)bid-ask spread and the specialist spread.
• B)market impact cost and the brokerage costs.
• C)investor opportunity cost and the brokerage costs.
• D)bid-ask spread and the market impact costs.
• E)None of the above.

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Definitions:

Profit Margin Ratio

A financial metric that measures the percentage of profit a company earns from its total revenue.

Net Income

The residual income of a business post all deductions, including taxes and expenses, from its gross income.

Net Sales

The total revenue generated from sales activities after deducting returns, allowances, and discounts.

Days' Sales in Inventory

A financial ratio that indicates the average time in days that a company takes to turn its inventory into sales.