Generally speaking, a firm will create value if its return on invested capital (ROIC) is less than the cost of capital.
Answer the following statement true (T) or false (F)
False
As a rule of thumb, if a firm's ROIC is greater than its cost of capital, it generates value; if it is less than the cost of capital, the firm destroys value. The cost of capital represents a firm's cost of financing operations from both equity through issuing stock and debt through issuing bonds.
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Variable costs are always relevant in decision making.
Answer the following statement true (T) or false (F)
The normal operating cycle helps define which of the following balance sheet sections?
A) Stockholders' equity B) Current liabilities C) Intangible assets D) Property, plant, and equipment
The feature of accounting in which means that there are at least two accounts affected in every transaction so that the accounting equation stays in balance is called:
A) the matching feature. B) the classifying feature. C) the dual nature of accounting. D) the full disclosure principle.
According to Porter's five forces model, which of the following firms would be least affected by the threat of substitutes?
A. a food vendor at a county fair B. a convenience store that sells retail products C. a firm that sells the only drug for a disease D. a corner latte shop in Atlanta E. a used car dealership in New York