Debt May Be the Preferred Form of External Financing for Many

question 107

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:

Psychological Study

The scientific research or investigation into human mind and behavior, exploring various aspects such as cognition, emotion, and social interactions.

Reactance

A motivational reaction to restrictions on personal freedom, manifesting in an urge to regain that freedom.

Accomplice Behavior

The actions taken by an individual who helps another to commit a crime or wrongful act.

Experimental Realism

The extent to which the conditions of an experiment mimic the real-world scenarios they aim to replicate or study, affecting the validity of the outcomes.