Debt May Be the Preferred Form of External Financing for Many

question 7

Multiple Choice

Debt may be the preferred form of external financing for many firms because:

• A)Most firms already have too much equity
• B)Tax rates on equity are lower
• C)Debt will not adversely affect the firm's financial ratios
• D)Equity issuance is considered by investors to be a negative sign

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Definitions:

Hub Runout

The measure of how much a wheel hub deviates from a perfect circle as it rotates, affecting the smoothness of the vehicle's ride.

Pad Lining Thickness

The thickness of the friction material on a brake pad, critical for brake performance and safety.

Caliper Piston

A component of disc brake systems, it resides within the caliper and moves outward to apply pressure on the brake pads against the rotor to slow or stop the vehicle.

On-car Lathe

A machine tool used directly on the vehicle, often for resurfacing brake rotors, to ensure they are parallel and smooth for proper operation.