A Company That Sells Common Stock and Uses the Money

question 41

True/False

A company that sells common stock and uses the money to pay off a loan is increasing its use of financial leverage.

---

Definitions:

Business Entity Assumption

An accounting principle that treats a business as an entity separate from its owners, meaning its financial transactions are recorded distinctly from those of its owners or other businesses.

Economic Unit

An entity, such as an individual, household, or organization, considered in economic analysis and decision-making.

FASB

Financial Accounting Standards Board, an organization responsible for establishing accounting and financial reporting standards in the U.S.

Federal Statutes

Laws passed by the national government of a country that are applicable throughout the country.