Issuing Debt Instead of New Equity in a Closely Held

question 42

Multiple Choice

Issuing debt instead of new equity in a closely held firm more likely causes owner-managers to

• A)work harder than they would if equity had been issued.
• B)consume more perquisites because the cost is passed on to the debtholders.
• C)enjoy more leisure time than they would with an equity issue.
• D)accept more unprofitable projects.
• E)shirk their duties as they have less capital at risk.

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Definitions:

Nonmaterial Entity

An entity that does not possess a physical form, often pertaining to concepts, ideas, or supernatural beings.

Consciousness

The state of being aware of and able to think about one's own existence, sensations, thoughts, and surroundings.

Cerebral Hemisphere

Each of the two parts of the brain (left and right) responsible for different functions, with the left typically handling logical reasoning and the right more involved in creative tasks.

Brainstem

The lower part of the brain that connects the cerebrum with the spinal cord and controls vital functions such as breathing and heart rate.