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

7. Receivables and Investments

Introduction to Investments in Securities

Financial Accounting

7. Receivables and Investments

Introduction to Investments in Securities

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Multiple Choice

Which of the following statements regarding a company's cost of capital is true?

The cost of capital represents the minimum return a company must earn on its investments to satisfy its investors.

The cost of capital is irrelevant when making investment decisions.

The cost of capital only includes the cost of debt, not equity.

The cost of capital is always equal to the interest rate on the company's most recent loan.

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Verified step by step guidance

Understand the concept of 'cost of capital': The cost of capital is the minimum return a company must earn on its investments to satisfy its investors, including both equity and debt holders. It represents the opportunity cost of using funds for a specific investment rather than alternative options.

Analyze the first statement: 'The cost of capital represents the minimum return a company must earn on its investments to satisfy its investors.' This is a correct statement because it aligns with the definition of cost of capital.

Evaluate the second statement: 'The cost of capital is irrelevant when making investment decisions.' This is incorrect because the cost of capital is a critical factor in determining whether an investment is worthwhile. It serves as a benchmark for evaluating the profitability of potential projects.

Examine the third statement: 'The cost of capital only includes the cost of debt, not equity.' This is incorrect because the cost of capital includes both the cost of debt (interest payments) and the cost of equity (expected returns by shareholders).

Review the fourth statement: 'The cost of capital is always equal to the interest rate on the company's most recent loan.' This is incorrect because the cost of capital is a weighted average of the cost of debt and the cost of equity, not just the interest rate on a single loan.