One Factor That Influences the Choice Between Debt and Equity

question 108

Multiple Choice

One factor that influences the choice between debt and equity is the

• A)returns anticipated from the enterprise.
• B)risk of nationalization.
• C)degree of control the owners hope to retain.
• D)state of the owners' estate plan.

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Definitions:

Inefficiently High Quality

A form of inefficiency in which sellers offer high-quality goods at a high price even though buyers would prefer a lower quality at a lower price; often the result of a price floor.

Government Imposes

Actions undertaken by a government to enforce regulations, taxes, or penalties on individuals or organizations.

Binding Price Floor

A price floor set above the equilibrium price, causing a surplus because the quantity supplied exceeds the quantity demanded.

Quota

A government-imposed trade restriction that limits the number or monetary value of goods that can be imported or exported during a specific time frame.