What is the major drawback of debt financing? Select one: You have to pay back the money Increasing debt changes the gearing ratio of the firm Interest payments must be made before shareholder dividends and irrespective of fluctuations in profits Lenders often require security of the loan against assets of the company

The key benefits associated with refunding debt are the reduction in the firm's debt ratio and the creation of more reserve borrowing capacity. true or false explain

Critique this statement: “The use of debt financing lowers the net income of the firm, and hence debt financing should be used only as a last resort.”

Which of the following is most consistent with using debt to reduce agency costs or conflicts?   Question 11 options:   Increasing debt reduces a firm’s business risk   The interest paid on debt reduces taxable income and income taxes   The interest paid on debt reduces cash that management of a firm might otherwise waste or use poorly   The issuance of debt helps firms increase their credit rating

Which is the quickest way to determine whether a firm has too much debt?

Is this statement true or false? Please explain in detail As debt-financing is usually cheaper than equity financing, debt-financing will lower risk for transnational company.

Which of the following is an advantage of debt financing?    a. Excessive debt increases the risk of equity holders and therefore depresses share price. b. The obligation is generally fixed in terms of interest and principal payments. c. Interest and principal obligations must be paid regardless of the economic position of the firm. d. Debt agreements contain covenants.

Is it better to finance a company thru debt or thru equity? Why? What are the downside and upside to each?

Financial slack is the amount of unused access to debt markets or bank financing. Which theory of capital structure would place the highest value on maintaining financial slack for a firm that is not in financial distress?   Question 10 options:   a)  Trade-off theory   b)  Debt financing as a managerial constraint   c)  Pecking order theory   d)  Modigliani & Miller irrelevance theory

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, lender