The balance sheet of Ipod Corporation on December 31, 2024: Ipod Corporation BALANCE SHEET AS OF DECEMBER 31, 2024 Assets Cash $ 40,000 Accounts and notes receivable 30,000 Inventory 90,000 $160,000 Liabilities and Capital Accounts and notes payable $ 20,000 Common stock 100,000 Retained earnings 40,000 $160,000 These errors were made by Ipod on December 31, 2023 and were not corrected: accrued revenue of $2,100 omitted, and prepaid expense of $1,000 omitted. On December 31, 2024, the inventory was overstated $5,000 and accrued expense of $1,400 was omitted. The net income shown by the books for 2024 was $13,200. The correct 2024 Net Income is:
Cost of Capital
Shareholders and investors who invest into the capital of the firm desire to have a suitable return on their investment funding. The cost of capital reflects what shareholders expect. It is a discount rate for converting expected cash flow into present cash flow.
Capital Structure
Capital structure is the combination of debt and equity employed by an organization in order to take care of its operations. It is an important concept in corporate finance and is expressed in the form of a debt-equity ratio.
Weighted Average Cost of Capital
The Weighted Average Cost of Capital is a tool used for calculating the cost of capital for a firm wherein proportional weightage is assigned to each category of capital. It can also be defined as the average amount that a firm needs to pay its stakeholders and for its security to finance the assets. The most commonly used sources of capital include common stocks, bonds, long-term debts, etc. The increase in weighted average cost of capital is an indicator of a decrease in the valuation of a firm and an increase in its risk.
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