Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

1. Introduction to Accounting

Fundamental Accounting Equation

Financial Accounting

1. Introduction to Accounting

Fundamental Accounting Equation

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Multiple Choice

The optimal capital structure has been achieved when the:

total assets equal total liabilities

firm's debt-to-equity ratio equals 1:1

firm's value is maximized and its weighted average cost of capital (WACC) is minimized

company has no long-term debt on its balance sheet

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Verified step by step guidance

Understand the concept of optimal capital structure: It refers to the mix of debt and equity financing that maximizes a firm's value while minimizing its Weighted Average Cost of Capital (WACC).

Recognize that achieving the optimal capital structure does not necessarily mean having equal amounts of debt and equity (1:1 ratio) or having no long-term debt. Instead, it is about finding the balance that minimizes financing costs and maximizes shareholder value.

Recall that WACC is calculated as a weighted average of the cost of equity and the cost of debt, where the weights are based on the proportion of each in the firm's capital structure. Minimizing WACC increases the firm's value.

Analyze the firm's financial statements and ratios, such as the debt-to-equity ratio, interest coverage ratio, and return on equity, to assess whether the current capital structure aligns with the goal of minimizing WACC.

Evaluate external factors such as market conditions, interest rates, and the firm's risk profile, as these can influence the cost of debt and equity, and thus the optimal capital structure.