Which of the Following Is a Disadvantage of a Debt

question 22

Multiple Choice

Which of the following is a disadvantage of a debt financing?

• A) No influence of lenders on management
• B) Lenders have no claim in the business profit
• C) Debt payments reduce the cash available to the firm
• D) Managers can make financial plans well in advance

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Definitions:

National Boundaries

The defined geographical limits of a nation, separating it from neighboring countries and marking the extent of its jurisdiction and sovereignty.

Ethical Standards

The principles that guide behavior and decision-making based on notions of right and wrong.

Risk Compartmentalization

The division of risks into different categories or compartments in an organization, which can lead to disjointed risk management and a failure to recognize the aggregate extent of risks.

Profit Centers

Individual units or divisions within a company that are responsible for generating their own revenue and profit.