Expenses That Fall Outside the Regular Operations of a Business

question 109

Multiple Choice

Expenses that fall outside the regular operations of a business are:

• A)not shown in the income statement of a merchandiser.
• B)treated as current assets and are shown as merchandise inventory.
• C)included under the other revenues and expenses section of the income statement.
• D)included in the selling and administrative expense section of the income statement.

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Definitions:

Cost of New Equity

The cost of obtaining additional funding through the issuance of new equity, considering underwriting fees and other issuance costs.

Retained Earnings

The portion of net income that is retained by the corporation rather than distributed to its owners as dividends.

Target Capital Structure

The relative amount of debt, preferred stock, and common equity that the firm desires. The weighted average cost of capital should be based on these target weights.

Cost of Equity

The return a company requires to decide if an investment meets capital return requirements, a crucial part of capital budgeting and often calculated using models like CAPM.