Which of the Following Statements Is True

question 44

Multiple Choice

Which of the following statements is true?

• A) In recent years external equity has been a large percentage of total sources of financing even though this is, by far, the most expensive source of financing.
• B) In recent years external equity has been a large percentage of total sources of financing. Some argue that this relationship exists because financial managers think stock prices are too high.
• C) In recent years external equity has been a small percentage of total sources of financing even though this is, by far, the cheapest source of financing.
• D) In recent years external equity has been a small percentage of total sources of financing. Some argue that this relationship exists because financial managers think stock prices are too low, even though this is inconsistent with efficient markets.
• E) In recent years external equity has been a small percentage of total sources of financing in part because of the legal reserves that the firms must hold against equity.