Which of the following best describes the tradeoff managers face concerning the usage of debt?     Answers: Lower taxes and lower risk of bankruptcy   Lower taxes and higher risk of bankruptcy   Higher taxes and lower risk of bankruptcy   Higher taxes and higher risk of bankruptcy

Q: If a firm’s ROE is low and management wants to improve it, explain how using more debtmight help.

A: ROE refers to return on equity.It is a measure of profitability of a firm with respect to its…

Q: Which of the following statements is not correct? Select the correct response: The principal amount…

A: ANSWER: WHEN A NON CASH ASSET IS ACQUIRED AND THE STATED RATE OF INTEREST IS DIFFERENT FROM THE…

Q: an you think of certain types of businesses/industries wherein a high amount of debt is typical and…

A: Introduction : In simple words, debt refers to the form of capital in which the company issues fixed…

Q: debt financing.

A: Debt financing refers to the amount which is raised by the company after selling the debt…

Q: Although the major benefit of debt financing is easy to observethe tax shield-many of the indirect…

A: Debt financing is the borrowed money that a person pays back the money with interest with a…

Q: Discuss MM proposition II under the situation when there are corporate taxes and risk-free debt.

A: Corporate tax is defined as the tax on the corporate's tax. Here, taxes used to make the payment on…

Q: hich of the following statements regarding the private debt market is FALSE? A) Private debt has…

A: The private debt market is the market in which owned by the owners, households and businessman. Bank…

Q: Explain Why you agree or disagree with the following statement. The answer should not be more than 3…

A: The MM theory helps to understand the impact of different sources of capital and the tax rates on…

Q: Which of the following is a constrain for the investors? a. The mentality tontake the high risk b.…

A: Investing is a critical component of wealth growth. It enables the investor to fight inflation,…

Q: Which of the following statements is most correct? Why?* choices: a. The expected return on…

A: Bonds are referred as the security type, where an issuer used to owe the debt holder and also are…

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: Which of the following is a reason that banks may favor fee compensation over balance compensation?…

A: In order to increase their deposits and use them for loan, banks usually prefer fee compensation…

Q: Define “financial frictions” in your own terms andexplain why an increase in financial frictions is…

A: Financial frictions can be defined as some conditions that exists in order to stop the financial…

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: How does collection policy influence sales, the collection period, and the bad debtloss percentage?

A: Through the collection policy, an organization is able to identify the various problems associated…

Q: What are the pros and cons of U.S. savings bonds?

A: We are allowed to answer one question at a time. Since you have not mentioned which answer you are…

Q: Which of the following is NOT a reason for sales discounts to be offered to the debtors(customers)?…

A: Sales Discount :-  Sales discount is offered to debtors to encourage earlier settlement of debts by…

Q: Which of the following is a disadvantage of using bonds?     a. Bondholders do not participate in…

A: Introduction : In simple words, there are several sources from which a company can raise capital to…

Q: financial leverage affect stockholders' control position? d) How does the tax structure influence a…

A: How does the tax structure influence a firm's willingness to finance with debt? It allows a company…

Q: Financial risk is the additional risk that stockholders face as a result of using debt, as opposed…

A: Risk denotes the variability in return. When the return fluctuates, then the risk of the security…

Q: Explain how the bond market facilitate government (fiscal) policies. How do you think the bond…

A: The bond market is separated into two sections: main and secondary markets. Because transactions…

Q: Adverse selection is a problem associated with equity and debt contracts arising from the lender's…

A: Issuing the financial instruments will increase the capital , as well as the capital of the company.…

Q: It can be true that for one industry, a certain level of debt is acceptable, but for another, it can…

A: The level of acceptable debt varies from one industry to another and while for one industry a given…

Q: What is a limitation common to both the current and quick ratio? *       Debtors may not pay on…

A: CURRENT RATIO: current ratio = current assetcurrent liabilities QUICK RATIO: quick ratio = current…

Q: In certain scenerios, some companies may choose to finance with a bank loan specifically because of…

A: Interest payment deduction can be claimed on borrowings while computing business income provided…

Q: The cost of debt is normally higher than the cost of equity. Is it a good idea to always carry a…

A: Solution: False,  The cost of debt is normally cheaper than the cost of equity.

Q: Companies

A: INTRODUCTION: COMPANIES RAISE THEIR FUNDS BY WAY OF TWO SOURCES: OWNED FUNDS(issuing shares ).…

Q: A. Briefly explain the problem of moral hazard in: (i) Equity financing (ii) Debt financing B.…

A: When there is an rise in the expected loss because of individuals and companies behaving carelessly,…

Q: Which of the following can impose serious economic consequences on a businessman? O a. Having more…

A: Sole proprietor or businessman has a disadvantage of unlimited liability under sole proprietorship…

Q: Holding everything else constant, which of the following statements is TRUE? * If amendments to the…

A: Interest on debt is a tax free expense, thus companies always take after tax cost debt in to…

Q: Banks may deny creditworthy borrowers loan requests if a. they are non-corporate entities b. they…

A: Loan is the money that an entity or an individual can borrow or raise from a bank or any other…

Q: stor who wish to take high risk would invest his money in Risk is interrelated to returns Debt…

A: Investor is defined as the person or individual who assign the capital with the future expectation…

Q: (a) the company debt ratio; (b) the interest coverage; (c) the amount of cash relative to sales or…

A: a.The company debt ratio is nothing but a ration of total debts to total assets.Higher the ratio the…

Q: How can the use of debt serve to discipline managers?

A: A debt in a capital structure is a liability for the company on which company is bound to earn as…

Q: (1) What factors might lead a company to gainadditional funds through debt financing rather…

A: Financial Activities: Financial exercises are exercises that organizations embrace to assist with…

Q: Which of the following is not an assumption made by Modigliani and Miller in relation to the…

A: The question is related to theories of Capital Structure.  As per MM Approach, a change in…

Q: Which of the following statements is NOT true? A. Debt contracts tend to impose more restrictions…

A: Financial sector of an economy is the one that controls and facilitates all the finance-related…

Q: Please explain: Managers estimate bad debt expense based on​ which of the following? professional…

A: Accounting principles means those set of standards which is followed while preparing the books of…

Q: Why do analysts need to consider different factors when evaluating a company’s ability to repay…

A: Short-term debt or current liabilities refers to the company's financial obligations to the…

Q: Which of the following is NOT an effect of the possibility of bankruptcy? O reduce the possible…

A: Interest rate on debt are fixed in nature but decided with rating of company. The interest rate are…