Which One of the Following Statements Is Generally True Concerning

question 15

Multiple Choice

Which one of the following statements is generally true concerning the costs of issuing securities?

• A) Underpricing is rarely a significant cost.
• B) Legal and other administrative costs generally average less than $1 million.
• C) Debt is cheaper to issue than equity.
• D) There are no economies of scale in security issuance.

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Definitions:

Credit Policies

The guidelines that a company follows to determine the creditworthiness of customers and the terms under which credit will be extended.

Bad Debt Expense

The expense recognized when receivables are no longer collectible, reflecting estimated losses from extending credit.

Percentage Rate

A proportion, often expressed as a percent, used to determine the interest to be charged or paid on a financial instrument or the growth rate of an investment.

Reported Earnings

The income stated in a company's financial statements, reflecting the company's performance over a specified period, typically a fiscal quarter or year.