Essential Cost Accounting Concepts and Formulas

Posted by on Dec 22, 2025 in Finance and Accounting | 0 comments

The following provides a comprehensive format for important questions in Cost Accounting, specifically designed for exams requiring descriptive answers.

1. What is Cost Accounting?

Cost Accounting is a branch of accounting that deals with recording, classifying, allocating, and analyzing all costs incurred during the production or service process. Its primary purpose is to assist management in cost control, cost reduction, and efficient decision-making. It also helps in determining the selling price

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Capital Structure, Mergers, and Acquisitions: Key Concepts

Posted by on Feb 11, 2025 in Finance and Accounting | 0 comments

Chapter 17: Capital Structure: Limits to Debt

Signaling

Investors view debt as a signal of firm value:

  • If a firm has a high level of debt, investors will think that the firm has high anticipated profits.
  • If a firm has a low level of debt, investors will think that the firm has low anticipated profits.

The firm’s capital structure optimization: Marginal benefit of debt = Marginal cost of debt.

Firms with high anticipated profits have lower expected bankruptcy costs; hence, they want to have more debt.

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