Other Things Being Equal, the Longer a Company's Operating Cycle

question 60

True/False

Other things being equal, the longer a company's operating cycle, the higher its operating costs are likely to be.

Identify the classification of different cash flows as operating, investing, or financing activities.

Recognize the reporting requirements for noncash investing and financing activities.

Comprehend the importance of cash flow information for decision-making by internal and external users.

Understand how cash flows affect financial ratios and business decisions.

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Definitions:

Cost of Debt

The effective interest rate a company pays on its debts, a key component in the calculation of a firm’s cost of capital.

Risk Premium

The excess return required from an investment in a risky asset over a risk-free investment.

Flotation Costs

The costs associated with issuing new securities, including underwriting, legal, registration, and other expenses.

Securities

Investment assets that denote a shareholding in a publicly-listed company (stock), a bondholder’s claim against a corporation or government, or ownership rights as outlined in an option contract.