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How do you explain cost of capital and its types?
Explain the term cost of capital and its importance in investment decision
What is meant by the term runnig cost?
the running cost is between two prices
What is meant by net working capital?
The phrase "net working capital" is a financial term which means the available liquid assets at a company's disposal. The term is sometimes just referred to as "working capital" or WC.
Which term refers to the cost a firm incurs for capital goods?
interest
What term refers to the cost a firm incurs for capital goods?
Interest
What is meant by the term substitution of capital for labor?
Changes in the price of capital have a similar effect on the demand for labour as a change in the price of any substitute good has on a demand curve. Thus if the cost of labour is relatively low, firms will reduce their use of capital (technology) resulting in greater use of labour in production.
Is a cell phone a capital good?
A capital good is a item that will have a long term value. Cell phones can have a cost high enough to qualify but there value is not long term This disqualifies this as a capital asset
Which term refers to the cost of a firm incurs for capital goods?
Interest
What do you meant by prefernce share capital?
Preference share capital means share capital which have preference over all other kind of share capital in term of profit and clearance at the time of dissolution of business.
What is meant by loan capital?
short term and long term liabilities, which have due dates and the interest is paid. for example , debentures. compnay raises funds by issuing debentures and thes funds are loan capital. which means capital raised by loan.
What is meant by capital rationing?
Placing limits on the amount of new investment undertaken by a firm, either by using a higher cost of capital, or by setting a maximum on the entire capital budget or parts of it.
The cost of capital should reflect the average cost of the various sources of long-term funds a firm uses to acquire assets?
Yes, the cost of capital is a weighted average of the various sources of long-term funds a firm uses, such as equity and debt. By considering the different costs and proportions of each source, the cost of capital provides a comprehensive measure of the overall cost of financing for the firm's assets.
