Which of the Following Statements Is Most Likely True of a Company

question 112

Multiple Choice

Which of the following statements is most likely true of a company that relies mainly on equity financing?

• A) It has to agree to burdensome covenants to acquire equity funds.
• B) It forgoes the opportunity to use financial leverage.
• C) It yields the same tax benefits as that of a company that relies only on debt financing.
• D) It imposes required payments on stockholders.

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Definitions:

Relationships Affected

Refers to how interpersonal, societal, or business connections are influenced by certain events or decisions.

Voidable Contract

A contract that appears valid and enforceable on the surface but may be declared void by one of the parties based on certain grounds, such as fraud or coercion.

Undue Influence

A situation where an individual is able to persuade another's decisions due to the relationship between the two parties, often leading to an unfair advantage.

Mutual Mistake

A contract law principle where all parties have a common but incorrect belief about a material fact, which can void the agreement.