Q: What is capital rationing?
A:
Q: Why might the weights of capital be different depending on whether book values,market values, or…
A: The weights of the capital should be different for book values of a equity, market value of a…
Q: How does sales stability affect the target capital structure?
A: Target capital structure: Target capital structure is defined as the combination of debt, preferred…
Q: What role do interest rates play in allocating capital to different potential borrowers?
A: Rate of interest : It is the amount paid by a borrower to use the capital borrowed from the…
Q: What basic principle of finance can be applied to thevaluation of any investment asset?
A: Investor invests in any investment to earn the returns from it. As per the risk and return analysis,…
Q: Why is the distinction between paid-in capital andretained earnings important?
A:
Q: Critically discuss over-investment and under-investment problems due to debt usage. What kinds of…
A: Capital structure means the amount of debt and equity which the firm has as its capital. The company…
Q: Why should a firm's investments always exceed its cost of capital?
A: The main aim behind any investment is to generate returns for the company. These projects help the…
Q: The cost of capital includes the cost of equity, the cost of long-term debt and the cost of accounts…
A: The capital of a corporation is the amount of money or funds that a corporation uses for operating…
Q: How is working capital calculated? Define Liquidity.
A: The working capital refers to the part of the capital that requires to meet the day-to-day…
Q: What would you choose? Other investment assets or Alternatives to fixed income and equities
A: Allocation of the investment is a much wider and troublesome task. the proper allocation may lead to…
Q: company's cost of debt capital?
A: Cost of debt is the amounts of the cost which are required by the company to pay have to pay to the…
Q: What approach banks may take to determine adequate capital?
A: For a bank it is highly important to ensure capital adequacy. Capital adequacy leads to stability of…
Q: Explain what is capital or capital financing? Examples
A: capital financing is the form of business finance that is raised through equity funds and lenders…
Q: What is the Cost of Equity Capital?
A: Companies’ capital structure may contain debt and equity. It is not necessary for a company to have…
Q: What is capital rationing, what conditions lead toit, and how should it be dealt with?
A: Capital budgeting is a process in which capital projects are assessed in terms of their viability…
Q: why is Capital Asset Pricing Model relevant
A: The Capital Asset Pricing Model, popularly known as CAPM, is an important model that is often used…
Q: How do the attitudes of lenders and rating agencies affect capital structure?
A: Capital structure of a company plays an important role in its decision making & it is based on…
Q: Explain the process of Return on Invested Capital?
A: It represents the amount of return earned by all the investors. It can be calculated by dividing…
Q: The cost of capital is a hurdle rate. Is this statement true? Why or why not?
A: The question is based on the concept of minimum required rate for any project . Hurdle rate is the…
Q: Why do we use the overall cost of capital for investment decisions even when only one source of…
A: The question is based on the concept of Financial planning.
Q: What are the principal objections to the use of the average rate of return method in evaluating…
A: Average rate of return: Under this method, the average net income is used in evaluating the capital…
Q: What is net operating working capital? Why does it exclude mostshort-term investments and notes…
A: Introduction: Working capital is the capital of company that is used in its day-to-day operational…
Q: How can the Calculation of capital-recovery cost (with return)be done?
A: Capital Recovery Cost: When a company purchases or invest in some assets for the business…
Q: Explain the concept of “working capital” in finance
A: The investment decision made in financial management is classified into two categories as…
Q: As per which approach of the capital structure, the overall cost of capital is unchanged because of…
A: As per the net operating income approach, the firm's overall cost of capital is not affected by the…
Q: Explain the difficulties for determining the cost of capital in the short term decision making.
A: Introduction: Capital structure relates to financing of the overall activities and development of a…
Q: How does the capital asset pricing model (CAPM) influence financial decisions regarding risk and…
A: CAPM is related to the connection between the securities and their expected returns. CAPM is…
Q: What is one classification scheme that firms often use to obtain risk-adjusted costsof capital?
A: The question is based on the concept of risk-adjusted costs of capital with consideration of…
Q: Why should both quantitative and qualitative factors be considered in capital investment decisions?
A: The Investment commitment on any project is based on many factors which are classified as…
Q: What do we call the cost that a borrower must payto use debt capital?
A: Debt capital is the capital that is borrowed from various financial institutions or other lenders…
Q: Why is working capital part of cash payouts in a capital investment, and what is its makeup?
A: The investment is an allocation and the commitment of the specific amount of funds to get the…
Q: What is the actual cost of capital to the borrower?
A: The cost of capital to the borrower is the weighted average cost of capital from all sources of…
Q: Why is the cost of capital sometimes referred to as a “hurdle rate”?
A: Cost of capital is the cost of financing a business, investment or a project. Cost of capital is…
Q: Why is the compressed adjusted present value approachappropriate for situations with a changing…
A: Compresses Adjusted Present Value shows Net Present Value(NPV) of a project after considering the…
Q: What effect would a decreased cost of capital have on a firm's future investments?
A: Cost of capital of the firm is its weighted average cost of capital. It considers the weighted…
Q: What is a good capital structure? Are low debt ratios always favorable?
A: The capital structure of a corporation is the exact combination of debt and equity used to support…
Q: What would you choose? OTHER INVESTMENT ASSETS or ALTERNATIVES TO FIXED INCOME AND EQUITIES
A: Portfolio investments: Portfolio investment is the type of investment in which various types of…
Q: What is the Return on Invested Capital?
A: Return on invested capital is calculated or determined to know the efficiency of the company on…
Q: purpose for capital analysis
A: Capital analysis is the study of capital structure of a business entity.
Q: How is the CAPM (Capital Asset Pricing Model) related to valuation?
A: The relationship between systematic risk and expected return on assets, particularly equities, is…
Q: What is the payback method of analyzing capital investments?
A: Formula: Payback period = Initial Investment / annual cash inflows
Q: Explain the term Return on Invested Capital?
A: The formula used to compute return on invested capital:
Q: What is Capital gearing and how might it be calculated?
A: Meaning of Capital Gearing Capital gearing is the ratio between total equity and total debt ( Fixed…
- Should short-term debt be considered in calculating cost of capital?
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