Since Debt Is Typically a Cheaper Source of Financing Than

question 241

Essay

Since debt is typically a cheaper source of financing than is equity, why don't firms use as close to 100% debt financing as possible?

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Definitions:

Adjusting Entry

A journal entry made at the end of an accounting period to allocate income and expenditure to the correct period.

Unused Supplies

Items that have been bought for operational use but remain unutilized or untouched within the storage or office space.

Prepaid Items

Expenses paid in advance and recorded as assets until they are used or consumed.

Expense Accounts

Accounts used in accounting to track money spent or costs incurred in a company's operations to generate revenue, typically categorized by the nature of the expenses.