If a Firm Chooses to Maintain a Fixed Debt-Equity Ratio

question 69

Multiple Choice

If a firm chooses to maintain a fixed debt-equity ratio, they can raise the additional needed funds by:

• A)Issuing debt, in which case dividends become the balancing item
• B)Issuing debt, in which case the amount of debt itself becomes the balancing item
• C)Issuing stock, in which case dividends become the balancing item
• D)Issuing stock, in which case no balancing item is needed

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Definitions:

Original Owner

The individual or entity that first held ownership or possession of an asset, property, or business before any transfers or sales.

Venture

A new business endeavor undertaken with risk in hopes of achieving financial gain or other benefits.

Customer-focused

An approach to business that prioritizes the needs and preferences of customers in product development, sales, and service.

Business Strategy

A plan of action designed by organizations to achieve certain long-term goals and objectives by leveraging resources.