Which of the Following Is Not a Sensible Reason for a Firm

question 9

Multiple Choice

Which of the following is not a sensible reason for a firm to rely on internal funds?

• A)Equity issues are generally expensive.
• B)A new bond issue may drive the firm's debt ratio too high.
• C)Financial markets interpret the issuance of equity unfavorably.
• D)All of these are sensible reasons to rely on internal funds.

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Definitions:

Debit/Credit

Fundamental aspects of all accounting transactions, where debits are entries on the left side, and credits are entries on the right side, used to record business transactions in the ledger.

Dividend

Money dispensed by a corporation to its owners/shareholders, generally from the company's earnings.

Investment Income

Income coming from interest payments, dividends, capital gains, and other profits made through an investment.

Associated Companies

Companies that are connected through common ownership or control but aren't subsidiaries or fully owned entities of the parent company.