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:

Classical Conditioning

A learning process that occurs through associations between an environmental stimulus and a naturally occurring stimulus, famously demonstrated by Pavlov’s dogs.

Systematic Desensitization

A therapeutic technique used to gradually reduce anxiety or fear towards a particular object or situation by slowly exposing the patient to the fear source while in a state of relaxation.

Token Economy

A behavioral modification technique that involves providing tokens as rewards for desired behaviors, which can later be exchanged for privileges or treats.

Operant Conditioning

A learning approach where the robustness of a behavior is changed by providing motivation or administering discipline.