United Systems is one of the country’s largest distributors of servers and video
ID: 2766859 • Letter: U
Question
United Systems is one of the country’s largest distributors of servers and video-conferencing technology. Recently, the company successfully expanded into three new markets. The company’s CFO needs to perform a post-audit to examine the feasibility of expansion into more new markets. Which of the following would be part of the post-audit? Check all that apply.
Comparing the company’s actual sales volume in the new markets to the company’s expected sales volume in the new markets
Determining which markets the company should expand into next
Explaining why the company spent three times more on shipping products than what was forecast
As a firm raises more and more capital, its cost of debt and preferred stock will most likely---------- .
Explanation / Answer
Part - A:Which of the following would be part of the post-audit? Check all that apply.
Answer a. Comparing the company’s actual sales volume in the new markets to the company’s expected sales volume in the new markets
c.Explaining why the company spent three times more on shipping products than what was forecast
Only the above two would apply since determing which markets to enter into is not a part of the feasibility study on whether to expand to new markets are not.
part- B:As a firm raises more and more capital, its cost of debt and preferred stock will most likely INCREASE.
As the company raises more capital , it increases the financial distress costs assocaited with more and more capital and hence the cost of debt and preferred shares will increase.
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