Which of the Following Is NOT a Likely Financing Policy

question 22

Multiple Choice

Which of the following is NOT a likely financing policy for a rapidly growing business?

• A) Adopt a modest dividend payout policy that enables the company to finance most of its growth externally.
• B) Borrow funds rather than limit growth,thereby limiting growth only as a last resort.
• C) Maintain a conservative leverage ratio to ensure continuous access to financial markets.
• D) If external financing is necessary,use debt to the point it does not affect financial flexibility.
• E) None of the above.

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Definitions:

Par Value

Is the face value of a bond or stock, representing the amount that will be returned to the investor at maturity or the value at which the stock is noted on the balance sheet.

Default Risk Premiums

The additional yield that investors demand for holding a bond that has a risk of default over a risk-free security.

Treasury Bond

A long-term, interest-bearing security issued by the government, with a maturity period typically longer than ten years.