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

Q: Which one of the following statements is correct? If the total debt ratio is greater than .50, then…

A: Answer: Equity multipler should be greater or equal to 1   Underlying theory  Equity Multiplier =…

Q: Do you agree with the statement: "Investors view debt as a signal of firm value"? Why? Briefly…

A: Debt is the amount of money that is owed by an organization to a third party, that is, the amount of…

Q: Suppose you believe that the economy is just entering a recession. Your firm must raisecapital…

A: A rate at which a borrower is ready to pay and depositor is ready to receive the money is known as…

Q: Identify the following as either an advantage (A) or a disadvantage (D) of bond financing for a…

A: Corporate Bond: Bonds issued by companies, whether they be public or private, are considered to be…

Q: Your company has a policy to use long-term debt to finance inventory and receivables. This is a…

A: When the working capital requirements are financed through long-term debt then it depicts that the…

Q: As a potential investor would you prefer to invest in a structured note? Why or why not?

A: Note: Since you have posted multiple independent questions in the same request, we will solve the…

Q: Agency costs of debt arise any time there is a conflict between lender interests and borrower…

A: First let us define agency costs. Agency costs in the context of debt refer to the potential…

Q: Financing with Debt Versus Equity. It is commonly understood that the cost of financing a…

A: For any entity, there are two ways of raising funds: Equity Financing and Debt Financing. Companies…

Q: What are the reasons that highly profitable firms use debt financing? 1 they have sufficient…

A: Bank is an institute which gives umbrella when sky is clear but sits back when its raining. So…

Q: You are working for a​ mid-sized company that is looking to estimate its cost of debt. The company…

A: The objective of the question is to identify the best proxy for estimating the cost of debt for a…

Q: Why do companies often prefer debt financing to other forms of financing for capital investments? a.…

A: Debt and Equity are two important sources of finance being used in business. On debt, interest…

Q: How do corporate borrowers use interest rate or cross-currency swaps to reduce reduce the costs of…

A: Optimum Capital Structure Occasionally, some financial restructuring is required by a company to…

Q: (1) How does getting a secured loan using accounts receivable as collateral differ from factoring?…

A: Hi student Since there are multiple questions, we will answer only first question. Sales means…

Q: It is often argued that debt becomes a more attractive mode of financing than equity as interest…

A: Debt refers to funds that are raised by an entity by generating outside liability for which entity…

Q: Floating-rate debt is advantageous to investors because the interest rate moves up if market rates…

A: Fixed-to-floating interest rate swaps are used by businesses to correct this imbalance. Fixed-rate…

Q: Provide an explanation of whether it is advantageous for a bank to classify debt investments as…

A: ANSWER   Provide an explanation of whether it is advantageous for a bank to classify debt…

Q: Ch. 14. Which one of the following is NOT an implication of market efficiency for corporate finance?…

A: market efficiency for corporate finance has Four implications

Q: Question 24 Which of the following is an advantage of debt over equity A It's generally cheaper B…

A: Meaning of Debt = Debt is a source of finance in which company/business is required to make payments…

Q: How does added debt potentially decrease the value of a firm?

A: Debt can be positive as well as negative, firms prefer to use debt in their capital structure to…

Q: Holding everything else constant, an increase in cash will decrease Omay increase or decrease O will…

A: Net debt is a financial metric that represents the difference between the company's total debt and…

Q: Long-term financing may be riskier than short-term financing during periods of tight credit because…

A: Long term financing refers to financing in which the maturity of the debt or the loan or the…

Q: ccording to Modigliani & Miller M Proposition II (MM Il), as a firm's debt-equity ratio decreases,…

A: MM have two proposition one is about the value of the firm and other is about the cost of capital…

Q: 3. Which one of the following statements is NOT true? A) Retained profits represent a free source of…

A: The cumulative net income of a corporation held at a certain moment, such as the conclusion of the…

Q: Discuss four (4) risks that your company is likely to be exposed to if it goes ahead with this…

A: Risk is defined as the possibility of failure to achieve a certain objective that is predefined by…

Q: Please answer the following question according to the figure below. 1. How does increase in debt…

A: Debt and equity financing Each source of financing has its own advantages and disadvantages. For…

Q: The RBA decides to buy bonds and securities from commercial banks on the open market. Other things…

A: When RBA buys bonds in the open market, the money supply in the economy increases, as it buys…

Q: Please explain one advantage and one disadvantage of financing a company with debt.   Advantage…

A: Advantage: Tax BenefitsOne significant advantage of financing a company with debt is the potential…

Q: Given that a firm is well within its current ratio and debt ratio covenants and that interest rates…

A: The firm cash and cash equivalents and debt is determined by the current ratio and debt ratio and if…

Q: What does 'deleveraging' mean? a) Financial institutions cutting back in lending b) Financial…

A: Leverage shows how much is the debt and how much is the equity and this is very important because…

Q: Explain what a unsecured debt, subordinated debt, senior debt is?   -is there risk in buying an…

A: Debt is the obligation that requires one party, the debtor to pay money to another party, the…

Q: Market risk is defined as the risk: Question 1Answer a. Incurred by granting loans to companies…

A: The objective of the question is to identify the correct definition of market risk in the context of…

Q: Explain how continuous reliance on debt financing will affect the return to the equity holders or…

A: Financing is the method through which a corporation acquires capital or funds from the financial…

Q: Consider the following two potential transactions: (i) borrow from a bank; and (ii) use the…

A: Financial leverage determines the proportion of debt capital in respect to the total capital…

Q: Liquidity risk is a. The risk of doing business in a particular industry or environment b. The…

A: When short term debt obligations of individual investor or business or financial institutions are…

Q: What is the most obvious difference between debt and equity financing? a. Principal and interest…

A: Debt financing includes bonds and debts which are financial instruments and use to raise finance for…

Q: m valuation, earnings and cash flows, re the cost of equity is the appropriate d y is the cost of…

A: The Cost of Equity is generally higher than the Cost of Debt since equity investors take on more…

Q: Identify the following as either an advantage or a disadvantage of bond financing for a company.

A: A bond is a debt security or financial instrument that represents a loan made by an investor to a…

Q: QUESTION 4 Which of the following statements is correct? O A. The tax benefit from using debt…

A: The leverage of the firm indicates the level of debt employed by the organization. If the usage of…

Q: Political stability is a major factor of which one of the following? business risk inflation risk…

A: "Hi, Thanks for the Question. Since you asked multiple questions, we will answer first question for…

Q: The company cost of capital depends on current profits and cashflows, which measures what investors…

A: The corporate cost of capital is reflective of the cost of average projects of the company and…

Q: Identify the following as either an advantage (A) or a disadvantage (D) of bond financing for a…

A: Bond financing refers To the borrowing for the long term that is used by the state and local…

Q: How banks can improve their return on equity and what are its negative externalities.

A: RoE is ubiquitous in banks, serving as both an indicator of overall performance and a means of…

Q: True/False and Explain: Josephine says that firms which obtain debt financing by posting collateral,…

A: The objective of the question is to determine whether the statement made by Josephine is true or…

Q: According to theory, the value of a firm is maximized by: Issuing no debt Issuing the maximum amount…

A: The value of a corporation is the total market value of the corporation which reflects the claims by…

Q: Small banks can participate in loans far in excess of their asset size by a. buying financial…

A:

Q: 4. Other things held constant, the more debt a firm uses, the lower its profit margin will be.

A: A ratio that helps to evaluate how much portions of the sales revenue of a company turns in the…