Which of the Following Is Not Considered a Capital Component

question 79

Multiple Choice

Which of the following is not considered a capital component for the purpose of calculating the weighted average cost of capital as it applies to capital budgeting?

• A) Long-term debt.
• B) Common stock.
• C) Short-term debt.
• D) Preferred stock.
• E) All of the above are considered capital components for WACC and capital budgeting purposes.

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Definitions:

Purchase Discounts Lost

The extra cost incurred by a company for not taking advantage of the discounts offered by suppliers for early payments.

Catalog Price

The price of an item as listed in a catalog, which may be subject to discounts based on various sales promotion strategies.

Perpetual Inventory System

An accounting method where goods are recorded as sold immediately through the use of computer systems, providing a continuous record of inventory.

Gross Price Method

An accounting practice where inventory and purchases are recorded at their full cost without deducting trade discounts.