Different countries have different laws and accounting regulations that encourage multinational companies to vary their capital structure in differentregionsWhich of the following components of accounting practice often differs between countries?O Capitalizing versus expensing depreciationShort-term liability fundingO Capitalizing versus expensing research and developmentO Reporting accounts receivables at costFinance professionals measure capital structure in different ways. One of them is by measuring leverage. Firms with more leverage tend to have atimes-interest-earned (TIE) ratio.

Q - 1, Multiple choice question:The correct answer is third option: Capitalizing versus expensing…

Answered: Different countries have different laws…

Fundamentals Of Financial Management, Concise Edition (mindtap Course List)

10th Edition

ISBN:9781337902571

Author:Eugene F. Brigham, Joel F. Houston

Publisher:Eugene F. Brigham, Joel F. Houston

Chapter13: Capital Structure And Leverage

Section: Chapter Questions

Problem 2TCL

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Differences in capital structure for companies in different countries is one reason that companies in different countries may have different costs of capital. O True False
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Discuss the factors that affect the WACC. Also discuss how these factors may differ somewhat from country to country. For example, if a company has a stronger balance sheet than other companies in its industry, investors will likely be willing to accept a lower interest rates on its bonds and this will lower the company’s overall cost of capital.
Several factors affect a firm’s need for external funds. Evaluate the effect of each following factor and place a check next to each factor that is likely to increase a firm’s need for external capital—that is, its AFN (additional funds needed). Check all that apply. The firm increases its dividend payout ratio. The firm switches its supplier for the majority of its raw materials. The new supplier offers less favorable credit terms and thus reduces the trade credit available to the firm, resulting in a reduction in accounts payable. The firm improves its production system and increases its profit margin. Accounts payable and accrued liabilities represent obligations that the firm must pay off. Assuming everything else holds constant, if they increase, the firm’s AFN will_________ .
The need for working capital management vary from industry to industry, and they can even vary among similar companies. This is due to several factors, including differences in collection and payment policies, the timing of asset purchases, the likelihood of a company writing off some of its past-due accounts receivable, and in some instances, capital-raising efforts a company is undertaking. Proper management of working capital is essential to a company’s fundamental financial health and operational success as a business. Critically analyse this statement with practical example.
Country differences, such as differences in the risk-free interest rate and differences in risk premiums across countries, can cause the cost of capital to vary across countries. The answer to this question in True. Group of answer choices True False
Which of the following is NOT a proactive financial strategy related to the OLI paradigm in explaining FDI? strategies to gain lower global cost of capital strategies to reduce global taxation O strategies to reduce operating and transaction exposure All of the above are proactive strategies.
According to the capital structure trade-off model: O a. The optimal capital structure minimizes the company's weighted average cost of capital. O b. There is no optimal capital structure, but instead there is a hierarchy of sources of capital. O c. There is no optimal capital structure, and companies should aim to maximize debt financing, since they thereby minimize their tax payments. O d. The optimal capital structure minimizes the company's market value. O e. The optimal capital structure minimizes the company's cost of equity.
How does a cost-efficient capital market help reduce the prices of goods and services? Describe the different ways in which capital can be transferred from suppliers of capital to those who are demanding capital. Is an initial public offering an example of a primary or a secondary market transaction? Indicate whether the following instruments are examples of money market or capital market securities. a. US Treasury bills b. Long-term corporate bonds c. Common stocks d. Preferred stocks e. Dealer commercial paper Briefly explain what is meant by the term efficiency continuum.
6. Factors that affect the cost of capital equation Each of the following factors affects the weighted average cost of capital (WACC) equation. Which of the following factors are outside a firm's control? Check all that apply. Tax rate The inflation rate The firm's capital budgeting decision rules The impact of cost of capital on managerial decisions Consider the following case: Acme Manufacturing Corporation has two divisions, L and H. Division L is the company's low-risk division and would have a weighted average cost of capital of 8% if it was operated as an independent company. Division H is the company's high-risk division and would have a weighted average cost of capital of 14% if it was operated as an independent company. Because the two divisions are the same size, the company has a composite weighted average cost of capital of 11%. Division H is considering a project with an expected return of 12%. Should Acme Manufacturing Corporation accept or reject the project? Accept the…
Capital and the production of goods and services. In many developing nations, limited financial markets, instruments, and financial institutions, as well as poorly defined legal systems, may make it costlier to raise capital and may lower the retum on savings or investments. They also help to facilitate the intemational flow of funds between countries. Indian financial market consists of two major segments: (a) Money Market; and (b) Capital Market. While the money market deals in short-term credit, the capital market handles the medium term and long-term credit. Q7. (Case Study Problem) Financial sector plays a crucial role in the accumulation of The money market is a market for short-term funds, which deals in financial assets whose period of maturity is up to one year. It should be noted that money market does not deal in cash or money as such but simply provides a market for credit instruments such as bills of exchange, promissory notes, commercial paper, treasury bills, etc. These…
What is the impact of capital controls that restrict mobility of capital across nationalborders on domestic financial systems and the performance of the economy?

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