Why does having audited financial statements bring down a company’s cost of capital? SLUTION Audited financial statements provide reasonable confidence to investors that the financial statements are materially correct, reliable, fair, and transparent. Thus increased confidence of investors results in lower interest rates and returns required by them and increased ability of company to raise more funds. Having audited financial statements also reduces the risk of fraud and help the organization to govern and operate effectively and efficiently. All these factors cause a real decrease in a company's cost of capital and the pool of informed investors willing to invest is increased when audited financial statements are available.

  • CreatedOctober 07, 2015
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