Relying Primarily on Debt Financing Is Very Dangerous for a Company

question 35

Multiple Choice

Relying primarily on debt financing is very dangerous for a company because ________.

• A) creditors can force a company into bankruptcy or take over company property
• B) creditors can sabotage the business by refusing to lend it money
• C) creditors can gain a majority share of the company and take it over
• D) it can be very stressful for the owners, thus causing them to make mistakes

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Definitions:

Cognitive Dissonance

A psychological theory which posits that individuals experience discomfort and distress when holding two or more conflicting cognitions, leading them to seek consistency.

Internal Attribution

The process of attributing the cause of behavior to internal, personal characteristics rather than to external, situational factors.

Weiner's Attribution Theory

A theory that explains how individuals infer the causes of their own and others' behavior, attributing them to either internal dispositions or external situations.

Intrinsic

Describes motivation or values driven by internal rewards, such as personal satisfaction or fulfillment, rather than external pressures or rewards.