Which of the following is a potential source of capital for a company to invest

Question

Which of the following is a potential source of capital for a company to invest in long-term assets?

Select one:

A. Bank loans

B. Net Income from past years

C. Issuing additional common stock

D. Issuing bonds

E. All of the above

The time value of money dictates that money received today will be worth ______ in the future than it is worth today?

Select one:

A. It depends on the discount.

B. More

C. Less

D. The Same

If the cash method of accounting is used rather than the accrual method, which of the following adjustments must be made to Net Income to arrive at after-tax cash flows?

Select one:

A. Change in Accounts Receivable

B. Change in Accounts Payable

C. Change in Expense Liability accounts

D. Depreciation expense

E. None of the above

Explanation / Answer

1.  E. All of the above

A company might raise new funds from the following sources

Bank loans - Borrowings from banks are an important source of finance to companies.

Net Income from past years - The management of many companies believes that retained earnings are funds which do not cost anything and use of retained earnings as a source of funds does not lead to a payment of cash.

Issuing additional common stock - A company seeking to obtain additional equity funds by issuing additional common stock which can be partly paid or fully paid as depending on the requirement of the co.

Issuing bonds - Sometimes management doesn't want to change the ownership of the co by issuing the additional common stock so they issue bonds where the can raise funds.

2. B. More

  The time value of money dictates that one dollar today is always worth more than one dollar tomorrow.

3. D. Depreciation expense

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