In Considering Equity and Debt Financing,which of the Following Statements

question 146

Multiple Choice

In considering equity and debt financing,which of the following statements is true?

• A)Compared to equity financing,debt is a more expensive source of funding.
• B)Interest and dividends payments are required to be made by the issuing corporation.
• C)In general,the higher the proportion of total debt-to-equity ratio,the greater the likelihood the firm will have difficulty in meeting its obligations in some future period.
• D)Most firms prefer to have no debt and rely on equity financing.

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Definitions:

Activity Cost Pools

A technique in managerial accounting where costs are aggregated based upon the activities that generate those costs, to assign costs more accurately.

Machine-Hours

A measure of production activity that quantifies the amount of time machinery is used to manufacture products during a specific period.

Batches

Quantities or groups of goods produced or processed at the same time in manufacturing.

Product Margins

The difference between the selling price of a product and the cost of goods sold, representing the profit per unit sold.