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:

Discriminatory Pricing

The practice of charging different prices to different consumers for the same product or service, based on factors like race, gender, or geographic location, which is often considered unethical and illegal.

Sherman Act

A landmark federal statute in the field of United States antitrust law passed by Congress in 1890 to prohibit monopolistic business practices.

Horizontal Restraint

A term used in antitrust law to describe practices that restrict competition among firms operating at the same level of the market, such as price-fixing agreements between competitors.

Predatory Pricing

A pricing strategy where a product or service is set at a very low price with the intent to drive competitors out of the market or create barriers to entry for potential new competitors.