Which of the Following Statements Is FALSE in Regard to Borrowing

question 195

Multiple Choice

Which of the following statements is FALSE in regard to borrowing money?

• A) In general, the greater the risk associated with a loan the greater the interest rate charge will be.
• B) Interest expense on a loan may impact prices and profits.
• C) Borrowing money is usually less expensive than reinvesting cash generated from operations.
• D) A company with a successful marketing strategy has its own internal source of funds-profits.
• E) None of these is false.

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Definitions:

GAAP-Based Financial Statements

Financial statements prepared according to Generally Accepted Accounting Principles, which serve as the standard framework of guidelines for financial accounting.

Permanent Fund

A lasting fund created to support specific public purposes, generating income while preserving the principal amount.

Governmental Fund

A type of fund used by governmental entities to account for revenues, expenditures, and balances that are not accounted for in proprietary or fiduciary funds.

Bonds Payable

A liability account that represents the amounts owed by an entity to bondholders that must be repaid at a future date.