1. What are Opportunity Costs?

When an option is chosen from alternatives, the opportunity cost is the "cost" incurred
by not enjoying the benefit associated with the best alternative.

2. How is depreciation accounted in project cash flows?

It is calculated by adding the depreciated amount to the net income after taxes,
because depreciation is in essence the recovery of funds over a year’s time, it must be
accounted for as an increase, even if company sustains an operating loss for the period
the cash flow statement is applicable.

The amount of depreciation will not reflect a source of income, but a source of funds.
Ensuring the depreciation is accounted correctly will help the small business owner to
maintain an accurate distinction between Income and recovery of expended funds
through depreciation credit.

3. What is operating cycle? How is it different from Cash Conversion Cycle (CCC)?

The operating cycle is the average period of time required for a business to make an
initial outlay of cash to produce goods, sell the goods, and receive cash from
customers in exchange for the goods.

However, CCC is the number of days that a business entity takes to convert its input
resources into liquid cash flow. It basically aims to measure how much time does the
company takes to sell its inventories, collect its receivables, and pay off its bills
without any delay penalty charged.

4. What is Inventory control?

Inventory control refers to the process of effectively managing consumable stock

items, parts, or supplies. Inventory control helps streamline stockroom, supply depot,
and small warehouse operations, and it provides item-level visibility so
that you know what you have, where it is, and when to order more.

5. What is YTM?
Yield to maturity is the discount rate at which the sum of all future cash flows from
the bond (coupons and principal) is equal to the current price of the bond.
It is also called as book yield or redemption yield.
6. What is Cost of Equity (Ke)?
 the cost of equity is the return a firm theoretically pays to its equity investors, i.e.,
shareholders, to compensate for the risk they undertake by investing their capital.
There are 3 ways in determining the Ke:
a) CAPM- Capital Asset Pricing Method
b) Bond Yield + Rf
c) Gorden’s Model

7. How is WACC calculated?

The WACC formula is calculated by dividing the market value of the firm’s equity by
the total market value of the company’s equity and debt multiplied by the cost of
equity multiplied by the market value of the company’s debt by the total market value
of the company’s equity and debt multiplied by the cost of debt times 1 minus the
corporate income tax rate.

8. How is working capital requirement determined?

It has many factors such as:
a) Nature of Business
b) Seasonality of industry and production policy
c) Competition
d) Production cycle time
e) Credit Policy
f) Growth and Expansion
g) Taxes
h) Price levels