Debt Is Not a Free Resource Because

question 34

Multiple Choice

Debt is not a free resource because

• A)the use of debt funds is restricted as designated by the debt instrument.
• B)companies must pay interest on the borrowings.
• C)companies must restrict cash flow until the debt is repaid.
• D)companies do not pay interest on the borrowings.

---

Definitions:

Noncash Assets

Assets that cannot be easily converted into cash, such as property, equipment, and investments.

Liquidated

The process of converting assets into cash or cash equivalents by selling them on the open market.

Personal Assets

Assets owned by an individual, including both tangible items like real estate and cars, and intangible items like investments and patents.

Income and Loss Sharing

A method often used in partnership agreements where profits and losses are distributed among partners according to pre-agreed proportions.