Which of the Following Factors Favor the Issuance of Debt

question 6

Multiple Choice

Which of the following factors favor the issuance of debt in the financing decision?
I.Market signaling
II.Distress costs
III.Management incentives
IV.Financial flexibility

• A) I and II only
• B) I and III only
• C) II and IV only
• D) I, II, and III only
• E) I, II, and IV only
• F) None of the above.

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Definitions:

Adjusting Entry

Adjusting entry is a journal entry made at the end of an accounting period to allocate income and expenditure to the appropriate period.

Revenue Recognition

This is an accounting principle that outlines the specific conditions under which revenue is recognized and determines how to account for it.

IFRS

International Financial Reporting Standards, a set of accounting principles for preparing financial statements to ensure consistency and transparency globally.

GAAP

Generally Accepted Accounting Principles refer to the commonly applied rules and standards in financial reporting and accounting.