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AICPA Exam CPA-Business Topic 3 Question 69 Discussion

Actual exam question for AICPA's CPA-Business exam
Question #: 69
Topic #: 3
[All CPA-Business Questions]

Which one of the following management considerations is usually addressed first in strategic planning?

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Suggested Answer: A

Choice 'a' is correct. 7.0 percent cost of funds from retained earnings.

The cost of retained earnings is equal to the rate of return required by the firm's common shareholders (or, in effect, the return 'lost' by them when the firm chooses to fund with retained earnings). While oftentimes this rate is somewhat subjective, we are given the facts to exactly answer the question in this case. The stock is currently selling for $100/share, and the dividend is given at $7/share.

$7 / $100 = 7%

Choices 'b', 'c', and 'd' are incorrect, per the above Explanation:/calculation.


by Jenelle at Apr 24, 2023, 03:44 AM

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Clay
11 hours ago
Haha, maybe they're testing our sense of humor. Annual budgets? That's like asking a chef to decide the restaurant's decor.
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Coleen
5 days ago
Recent annual budgets? Come on, that's just numbers, not the big picture. Obviously, it's about being an industry leader!
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Carma
7 days ago
I'd say organizational structure is the key here. You need to understand your capabilities before setting goals.
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Ariel
10 days ago
Definitely the overall goals of the firm. You can't build a strategy without clear objectives in mind.
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Annelle
13 days ago
But what about D) Being an industry leader? Shouldn't that be the priority?
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Ryan
16 days ago
I agree with Dolores. Setting the overall goals is crucial for strategic planning.
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Dolores
18 days ago
I think A) Overall goals of the firm is usually addressed first.
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