If a Company Is Using the Accrual Method of Accounting,when

question 23

Multiple Choice

If a company is using the accrual method of accounting,when is revenue recorded?

• A) When cash is received, even though services may be rendered at a later date
• B) When services are rendered, even though cash may be received at a later date
• C) When cash is received, before the completion of the services
• D) When cash is received, 30 days after the completion of the services

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Definitions:

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.

WACC

Weighted Average Cost of Capital; a calculation of a firm's cost of capital in which each category of capital is proportionately weighted. It represents the average rate that a company is expected to pay to finance its assets.

Cost of Debt

The effective rate that a company pays on its borrowed funds from financial institutions and other sources.