What does a high weighted average cost of capital (WACC) signify?

June 30, 2024 No Comments

A: A high weighted average cost of capital, or WACC, is typically a signal of higher risk associated with a firm’s operations. Investors tend to require additional return to assume additional risk. Let’s back up a bit. A company’s WACC can be used to estimate

What does a negative correlation coefficient mean?

June 30, 2024 No Comments

A: A negative correlation coefficient means that, for any two variables X and Y, an increase in X is associated with a decrease in Y. A negative correlation demonstrates a connection between two variables in the same way a positive correlation coefficient does, and the

What are the sources of funding available for companies?

June 30, 2024 No Comments

A: Despite all the differences among companies, there are only a few sources of funds available to all firms. 1. They make profit by selling a product for more than it costs to produce. This is the most basic source of funds for any company

What are the types of costs in cost accounting?

June 30, 2024 No Comments

A: Cost accounting is an accounting process that measures and analyzes the costs associated with products, production, and projects, so that correct amounts are reported on a company’s financial statements. Cost accounting aids in decision-making processes by allowing a company to calculate, evaluate, and monitor its costs.

What are typical forms of capital assets within a manufacturing company?

June 30, 2024 No Comments

A: Manufacturing companies heavily rely on their capital assets to generate revenues and profits. A capital asset can be tangible or intangible and movable or immovable. Typical forms of tangible capital assets for a manufacturing company include land, buildings, machinery, plants, factories and furniture. Typical

What are working capital costs?

June 30, 2024 No Comments

A: Working capital costs (WCC) refer to the costs of maintaining daily operations at an organization. These costs take into account the following two factors: the company’s short-term debt position and the current portion of long-term debt, which is generally the portion of debt due

What can cause the terminal growth rate to be negative?

June 30, 2024 No Comments

A: Investors can use several different formulas when calculating terminal value for a firm, but all of them allow – at least in theory – for the growth rate to generate a negative terminal value. This would occur if the cost of future capital exceeded

What can working capital be used for?

June 30, 2024 No Comments

A: Working capital is used to cover all of a company’s short-term expenses, including inventory, payments on short-term debt and operating expenses. Basically, working capital is used to keep a business operating smoothly and meet all its financial obligations within the coming year. What Is

What are the main differences between single step and multiple step income statements?

June 30, 2024 No Comments

A: An income statement is a financial summary of a company’s financial operations over a set period of time. However, not all companies have the same reporting requirements for their respective income statements. Smaller companies that have simple structures can get away with single-step income

What are the main income statement ratios?

June 30, 2024 No Comments

A: The following financial ratios are derived from common income statements and used to compare different companies within the same industry. There are other ratios that are gleaned from an income statement, though the ones below represent some of the most common. Gross Margin Gross

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