Financial Policy & the Cost of Capital


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What is the best definition of cost of capital?

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1. What resources can a company use as part of its capital structure to finance its business?

2. After a lot of analysis, Maryanne decides to invest in new equipment for her company. How will Maryanne's decision affect her company? Choose the best answer.

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About This Quiz & Worksheet

Determine how much you grasp of financial policy and the cost of capital with this worksheet and quiz. Questions will cover different financial policies and how businesses invest.

Quiz & Worksheet Goals

The worksheet and quiz will guide you to:

  • Determine the correlation between a high risk and a return
  • Name two resources companies use for financing their operations
  • Identify the goal of a capital structure
  • Recognize the deciding factors of whether to accept or reject an investment
  • Understand what the financial policy determines for a company as far as investment is concerned

Skills Practiced

Practice the following study skills:

  • Making connections - use understanding of the concept of high risk and how it is connected to return
  • Critical thinking - apply relevant concepts to examine information about capital structure in a different light
  • Distinguishing differences - compare and contrast topics from the lesson, such as accepting and rejecting an investment

Additional Learning

To gain more understanding about this area of study, review the lesson entitled Financial Policy & the Cost of Capital, which will cover the subsequent study objectives:

  • Define financial policy
  • Explain the cost of capital
  • Determine how financial policy and the cost of capital are related