The Use of Debt Financing

question 59

Multiple Choice

The use of debt financing

• A) causes a manager to take on riskier projects in order to make interest payments.
• B) is more expensive than issuing equity due to the use of covenants.
• C) allows managers to make discretionary interest payments.
• D) limits the ability of managers to waste stockholders' money.

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Definitions:

Imbibing Idiot Bias

is a cognitive bias that suggests people expect individuals who consume alcohol to also exhibit foolish, reckless, or irrational behavior.

Independent

Free from outside control; not subject to another's authority or influence; self-directing.

Interdependent

Involving mutual reliance between two or more parties or systems.

Western Culture

The social norms, beliefs, values, and practices originating from or associated with the Western part of the world, including Europe and North America.