Which of the Following Is True

question 24

Multiple Choice

Which of the following is true?

• A) Companies can raise common equity only by issuing new shares of common stock.
• B) There is no opportunity cost associated with use of retained earnings as a source of common equity.
• C) Most large mature firms issue new shares of common stock on a regular basis.
• D) Companies can raise common equity by issuing new shares of common stock and through retained earnings.

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Definitions:

Period Cost

Costs that are expensed in the period in which they are incurred, as opposed to being capitalized or included in the cost of goods sold.

Depreciation

The systematic allocation of the cost of a tangible asset over its useful life, reflecting the decrease in value due to wear, tear, or obsolescence.

Product Cost

encompasses all costs incurred to produce a product, including direct materials, direct labor, and manufacturing overhead.

Advertising

A marketing communication that employs an openly sponsored, non-personal message to promote or sell a product, service, or idea.