The common ways through which firms fail financially includes under-capitalization, poor control over cash flow and inadequate expense control.
Majority of firms who failed financially are those firm with outdated financial plan or lack of current trend in the industry.
Why firms fail financially includes:
- Under-capitalization which is when the firm does not have sufficient capital to conduct normal business operations and pay the creditors.
- Poor control over cash flow is when the firm does not have firm control over the cash going in and out of the organization.
- inadequate expense control is when the firm does not effectively control the amount of expenses incurred for operation.
In conclusion, the common ways through which firms fail financially includes under-capitalization, poor control over cash flow and inadequate expense control.
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Answer:
D. This statement is true
Explanation:
It is true that differential analysis may be used for the common decisions of leasing or selling equipment and manufacturing or purchasing a needed part.
Answer:
12%
Explanation:
For computing the equity cost of capital first we have to determine the weight of the capital structure after that the WACC and then finally equity cost of capital which is shown below:
Weight of capital structure
For debt
= $200 million ÷ $400 million
= 0.50
For equity
= 50 million × $4 ÷ $400 million
= 0.50
Now the WACC is
= 0.50 11% + 0.50 × 5%
= 8%
Since the value fo equity is declined by
= 50 × $3
= $150
Now the equity cost of capital is
= WACC + (WACC - interest rate) × (debt ÷ equity)
= 8% + (8% - 5%) × (200 ÷ 150)
= 12%
Answer: (E)
A pay policy line "reflects the pay structure in the market, which always matches rates in the organization."
Explanation:
A company will usually consider the the general pay structure of its market while setting its own pay level. This helps prevent the company from overpaying or underpaying its employees.
This pay level the company sets its pay at, is called a pay policy line.