Which One of the Following Is Not a Use of Cash

question 89

Multiple Choice

Which one of the following is not a use of cash?

• A)The payment of a loan of which was borrowed in order to purchase a factory
• B)The issuance of a stock dividend
• C)Payments to suppliers
• D)A payment to reduce long-term debt

---

Definitions:

Debt

Money that is owed or due to be paid, typically resulting from borrowing funds to be repaid with interest.

Financial Leverage

Financial leverage is the use of borrowed money (debt) to amplify the potential returns from an investment or project.

Leverage

The use of borrowed funds to increase the potential return of an investment.

Optimal Capital Structure

The best mix of debt, preferred stock, and common equity that maximizes a company’s stock price while minimizing its cost of capital.