Indicate Whether Each of the Following Statements Is True or False

question 15

Short Answer

Indicate whether each of the following statements is true or false.
_____ a)Loaning cash to another company is considered a financing activity on the statement of cash flows.
_____ b)The major difference between treating the extension of credit to a customer as accounts receivable and treating it as notes receivable is the existence of interest.
_____ c)In a promissory note,the payee issues the note to the maker.
_____ d)Interest rates are always stated on an annual basis,regardless of the length of the note.
_____ e)Accruing interest on a note receivable is considered an asset use transaction.

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Definitions:

Debt-Equity Ratio

The ratio indicating a corporation's reliance on debt financing, found by dividing its total debts by the equity held by its shareholders.

After-Tax Cost of Debt

The net cost of debt after accounting for the effects of taxes, reflecting the actual cost to a company.

Cost of Equity

The theoretical compensation paid by a company to its equity investors, or shareholders, for the risk involved in investing their capital.

Weighted Average Cost of Capital (WACC)

The average rate of return a company is expected to pay to all its security holders to finance its assets.