A Disadvantage of Equity Financing Is

question 17

Multiple Choice

A disadvantage of equity financing is

• A)dilution of ownership interest
• B)the pressure to pay dividends
• C)the appearance of failure
• D)interest expense

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Definitions:

Economies of Scale

The cost advantages that enterprises obtain due to size, output, or scale of operation, with cost per unit of output generally decreasing with increasing scale.

Constant Returns to Scale

The condition where increasing all inputs by a certain factor leads to an increase in output by the same factor, indicating linear scalability in production processes.

Economies of Scale

Cost advantages that enterprises obtain due to scale of operation, with cost per unit of output generally decreasing with increasing scale as fixed costs are spread out over more units of output.

Specialization of Labor

The division of labor where individuals or groups focus on specific tasks or jobs, increasing efficiency and productivity.