Tutor profile: Giosue I.
Subject: Corporate Finance
What differentiates a simple capital structure versus a complex capital structure?
The key difference between a simple and complex capital structure has to do whether a firm's capital structure has convertible instruments, such as convertible debt and preferred equity that can exchanged for common stock. Identifying a company's capital structure is key to calculating the weighted-average cost of capital (WACC), which would be used to determine the value of a firm.
What are the key differences between NPV (Net Present Value) and IRR (Internal Rate of Return)?
The purpose of calculating NPV and IRR usually has to do with determining whether to undergo a capital project with the objective of determining whether the project will increase shareholder wealth. In determining whether to accept a project, projects with a positive NPV or an IRR that is greater than the required rate of return, "R", should be accepted. The key differences between IRR and NPV is that IRR is the rate of return where NPV = 0 and NPV is the value of cash values discounted by the required rate of return ("R").
What are the primary methods for determining the value of cost of goods sold (COGS) within a periodic inventory system?
It is important to note that the answer below is specifically for periodic inventory systems. Within periodic inventory systems, the amount of inventory available for sale and the cost of goods sold are determined at points in time, i.e. periodically. This is different than a perpetual inventory system whereby inventory available and cost of goods sold are known and accounted for at all times. A company employing periodic inventory then can use a few different approaches to determine the ending inventory of the period and cost of goods sold: Specific Identification, Weighted-Average Method, First-in, First-Out (FIFO), and Last-in, First-out (LIFO).
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