Which of the Following Is NOT a Cost to the Firm

question 33

Multiple Choice

Which of the following is NOT a cost to the firm of increasing debt financing?

• A)Investors will demand a higher interest rate on debt
• B)The risk to common stockholders increases
• C)Stockholders will demand a higher return
• D)The cost of common equity will decrease

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Definitions:

Service Firm

An enterprise offering non-physical products or services to its customers, as opposed to tangible items.

Merchandising Company

A business that purchases goods in finished form for resale to consumers, generating revenue through sales activities.

Retailer

A business or person that sells goods directly to consumers from a physical or online store.

Periodic Inventory System

An accounting method that records inventory purchases and sales periodically, often at the end of an accounting period, instead of continuously updating stock levels.