Other Things Equal, a Firm That Must Obtain Its Long-Term

question 72

Multiple Choice

Other things equal, a firm that must obtain its long-term debt and equity in a highly illiquid domestic securities market will probably have a:

• A) relatively low cost of capital.
• B) relatively high cost of capital.
• C) relatively average cost of capital.
• D) cost of capital that we cannot estimate from this question.

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Definitions:

Returns

A term used in finance to describe the profit or loss derived from investing or saving.

Risk

Exposure to danger, harm, or loss, often considered in financial contexts such as investments or business ventures.

Trade Credit

A financial arrangement where a buyer is allowed to purchase goods or services and pay for them at a later date.

Rate of Interest

The percentage of a loan amount charged for borrowing money, expressed as an annual percentage of the principal.