L. Directions: Write TRUE if the statement is correct; write FALSE if the statement is wrong. Write your answer on the space provided af ter each number. _1. Equity funding involves repayment.
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- The difference between equity financing and debt financing is that A. equity financing involves borrowing money. B. equity financing involves selling part of the company. C. debt financing involves selling part of the company. D. debt financing means the company has no debt.The difference between equity financing and debt financing is that a. equity financing involves borrowing money. b. debt financing means the company has no debt. c. equity financing involves selling part of the company. d. debt financing involves selling part of the company.True or False 1. In equity financing, the corporation is required to distribute dividends to its stockholders on a regular basis. 2. One of the company's sources of funds is its own accumulated earnings. 3. In a debt equity, there exists a debtor and creditor relationship. 4. Supplier's credit as a source of fund is advantageous both to the debtor and the creditor. 5. One can open a deposit account with a lending institution.
- Which of the following statements are correct: 1. Owners of incorporated businesses have unlimited liability 2. The maximum amount that equity holders can lose is their original investment 3. Equity value can be negative 4. Lenders may not get loans back in whole 1, 3, and 4 1, 2, 3, and 4 1 and 3 2 and 4Guide Questions 1. What is the Zapatoes Inc's capital structure? What is the effect of an additional debt? Additional equity? 2. Assess the profitability of Zapatoes Inc's. What is the effect of issuing debt to its profitability? Effect of equity? 3. What factors are considered in deciding whether to take long-term or short-term financing? 4. What financing should Anthony Cruz take?A common problem facing any business entity is the debt versus equity decision. When funds are required toobtain assets, should debt or equity financing be used? This decision also is faced when a company is initiallyformed. What will be the mix of debt versus equity in the initial capital structure? The characteristics of debt arevery different from those of equity as are the financial implications of using one method of financing as opposedto the other.Cherokee Plastics Corporation is formed by a group of investors to manufacture household plastic products.Their initial capitalization goal is $50,000,000. That is, the incorporators have decided to raise $50,000,000 toacquire the initial assets of the company. They have narrowed down the financing mix alternatives to two:1. All equity financing2. $20,000,000 in debt financing and $30,000,000 in equity financingNo matter which financing alternative is chosen, the corporation expects to be able to generate a 10% annualreturn, before…
- Financial markets are important becauseA. It gives investors equal footing with debtorsB. Capital for individuals are stringentC. Unemployment rate are increasedD. Corporate finance needs are minimized C.D.In general, debt financing is _______ than equity financing. A firm’s ______ has priority in claiming the company’s assets. Question 17 options: 1) less costly, shareholders 2) less costly, lender 3) more costly, shareholders 4) more costly, lenderA common problem facing any business entity is the debt versus equity decision. When funds are required to obtain assets, should debt or equity financing be used? This decision also is faced when a company is initially formed. What will be the mix of debt versus equity in the initial capital structure? The characteristics of debt are very different from those of equity as are the financial implication of using one method of financing as opposed to the other. Cherokee Plastics Corporation is formed by a group of investors to manufacture household plastic products. Their initial capitalization goal is $50,000,000. That is, the incorporators have decided to raise $50,000,000 to acquire the initial assets of the company. They have narrowed down the financing mix alternatives to two: All equity financing $20,000,000 in debt financing and $30,000,000 in equity financing No matter which financing alternative is chosen, the corporation expects to be able to generate a 10% annual return, before…
- QUESTION 1 The DISADVANTAGES of equity finance are…. i. Entrepreneur does not have total control of the company. /Usahawan tidak mempunyai kawalan menyeluruh syarikat ii. Equity Investors do not always agree to the plans of the business/ Pelabur Ekuiti tidak selalu bersetuju dengan rancangan perniagaan iii. Arranging equity financing is much more complex /Mengatur pembiayaan ekuiti adalah lebih kompleks iv. Entrepreneur does not have to repay the money invested/injected into the company/ Usahawan tidak perlu membayar balik wang yang dilaburkan/disuntik ke dalam syarikatA common problem facing any business entity is the debt versus equity decision. When funds are required to obtain assets, should debt or equity financing be used? This decision also is faced when a company is initially formed. What will be the mix of debt versus equity in the initial capital structure? The characteristics of debt are very different from those of equity as are the financial implications of using one method of financing as opposed to the other.Cherokee Plastics Corporation is formed by a group of investors to manufacture household plastic products. Their initial capitalization goal is $50,000,000. That is, the incorporators have decided to raise $50,000,000 to acquire the initial assets of the company. They have narrowed down the financing mix alternatives to two: All equity financing $20,000,000 in debt financing and $30,000,000 in equity financing No matter which financing alternative is chosen, the corporation expects to be able to generate a 10% annual return,…Which of the following statement is INCORRECT? Question 15 options: 1) The finance manager manages the short-term balance sheet items of the company, such as current assets and current liabilities. 2) The finance manager uses investment evaluation techniques to decide whether to purchase fixed assets. 3) The finance manager seeks to maximise the firm’s wealth when deciding on the choice of capital sources such as debts and equity. 4) The right-hand side of the balance sheet refers to the company’s investment decisions to buy fixed assets to generate returns.