FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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Question
- Which is true of equity financing?
- It has no fixed maturity date
- It provides a tax shield
- It offers creditors no cushion against losses
- Struggling companies still need to pay dividends
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- How a firm splits its income between retained earnings and dividends does not affects its rate of growth, which is determine by the firms basic earning power. True or false ?arrow_forwardSuppose managers of a firm know that the company is approaching financial distress. Should the managers borrow from creditors and issue a large one-time dividend to shareholders? How might creditors control this potential transfer of wealth?arrow_forwardWhy would a company that is a good bond investment not be a good equity investment?arrow_forward
- True of False? Contributed capital decreases when the company has a net loss. If your answer is “False”, then explain (in one sentence) why the statement is false.arrow_forwardWhich of the following is NOT an effect of the possibility of bankruptcy? O reduce the possible payoff to stockholders. increase financial distress costs. reduce the interest rate on debt. reduce the current market value of the firm.arrow_forward
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