财务会计概念与应用答案Albrecht_Ch_23_SM_3PP.docVIP

CHAPTER 23 DISCUSSION QUESTIONS 1. Invested capital represents all the money invested by banks and others who have provided interest-bearing loans to the organization, plus all the money invested by the owners (or stockholders) of the company. Note that the money invested by the owners includes the past earnings retained in the company. Invested capital can be measured either by adding together all the noncurrent liabilities plus stockholders’ equity, or by subtracting current liabilities from total assets. 2. The cost of capital for the organization represents the interest costs demanded by the debt holders and the expected return demanded by the stockholders. The costs are represented as rates; that is, the interest rate and rate of return. The rates are then averaged together to form the weighted average cost of capital, or WACC. 3. The EVA? calculation explicitly incorporates the weighted average cost of capital for the organization as expected by its debt holders and stockholders. Not all capital costs are demanded in the year they are incurred. Specifically, debt holders sometimes defer interest charges until the debt matures, and stockholders often delay expected returns until a later date. Nevertheless, if the organization fails to earn enough income to pay for these expected capital costs, then it is falling behind on its economic costs, which is demonstrated by a negative EVA?. 4. The EVA? calculation is Net operating income after tax – (Cost of capital ( Invested capital). Clearly, there are three elements in this calculation, and the organization can choose to focus on any combination of these elements to improve EVA?. More specifically, it can increase revenues or decrease expenses to improve operating profit; it can reduce its average costs of capital by replacing its most expensive forms of debt or equity funding with less expensive funding; or it can liquidate assets and pay back debt holders or stockholders. 5. The concept of JIT changed t