Which of the Following Statements Is CORRECT

question 58

Multiple Choice

Which of the following statements is CORRECT?

• A) A change in a company's target capital structure cannot affect its WACC.
• B) WACC calculations should be based on the before-tax costs of all the individual capital components.
• C) Flotation costs associated with issuing new common stock normally reduce the WACC.
• D) If a company's tax rate increases,then,all else equal,its weighted average cost of capital will decline.
• E) An increase in the risk-free rate will normally lower the marginal costs of both debt and equity financing.

Understand and differentiate between various liquidity ratios and their implications for a company's short-term financial health.

Apply vertical analysis to different components of financial statements and interpret the results.

Calculate and interpret inventory turnover and its impact on business operations.

Identify the components included and excluded in computing the acid-test ratio.

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Definitions:

Abdominal

Pertaining to the abdomen, the body region that contains the primary organs of the digestive system.

Thoracic

Pertaining to the thorax, or chest region, which houses the heart and lungs among other vital organs.

Dorsal

Relating to the back or posterior part of an organism in contrast to the ventral, or front, side.

Mediastinum

The central compartment of the thoracic cavity, located between the lungs, containing the heart, thymus, esophagus, trachea, and major blood vessels.