Use of the Marginal Cost of Capital

question 97

Multiple Choice

Use of the marginal cost of capital

• A) acknowledges that when retained earnings is used up as a source of equity the cost of capital rises as new common stock is sold to support more growth.
• B) recognizes that the return from the last dollar of funds generated should be equal to the cost of the last dollar of funds raised.
• C) both a and b are correct.
• D) none of these are correct.

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Definitions:

Understated

Understated means that a financial amount has been reported or recorded as less than its actual or true value.

Posting

The process of recording financial transactions in the accounting ledger from the journal.

Ledger

A comprehensive collection of a company's financial accounts, providing a record of all financial transactions.

Trial Balance

A report listing all accounts with their respective balances, prepared again to ensure the total debits equal total credits in the accounting records.