The Financing Option That Has the Lowest Risk to a Company

question 52

Multiple Choice

The financing option that has the lowest risk to a company is financing by:

• A)retained earnings.
• B)issuing stock.
• C)issuing bonds payable.
• D)issuing notes payable.

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Definitions:

Accrual Basis

An accounting method where revenue and expenses are recorded when they are earned or incurred, regardless of when cash transactions occur.

Cash Basis

An accounting method where revenues and expenses are recognized only when cash is received or paid.

Income Taxes Payable

Liabilities owed to the government for income taxes, not yet paid by the company.

Income Tax Expense

The total amount of income tax a company is obligated to pay to the government, reported on its income statement.