Issue Costs for Equity Are Higher Than Those for Debt

question 90

Multiple Choice

Issue costs for equity are higher than those for debt for all of the following reasons except:

• A)Equity issues have higher administrative costs
• B)Underwriting stock is riskier than underwriting bonds
• C)Equity issues involve significantly more time to sell
• D)Equity issues have lower economies of scale

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Definitions:

Adjusted Trial Balance

The trial balance prepared after all the adjusting entries have been posted.

Financial Statements

The formal records of the financial activities and position of a business, person, or other entity, typically including the balance sheet, income statement, and cash flow statement.

Plant Asset

Long-term tangible assets used in the operation of a business and not intended for resale.

Current Liabilities

Liabilities that will be due within a short time (usually one year or less) and that are to be paid out of current assets.