Financial managers need to use all sources of financing in order to determine the cost of capital.

Question

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Financial managers need to consider all sources of financing, including equity, debt, and retained earnings, to determine the cost of capital for their firm. This allows for a comprehensive analysis of the different costs associated with each source of financing and helps managers make informed decisions about how to fund their operations. Ignoring one or more sources of financing can lead to an incomplete or inaccurate assessment of the cost of capital, which can have significant implications for a firm's financial performance in the long term.

Financial Managers Need to Use All Sources of Financing in Order