which of the following is not an advantage of equity rather than debt financing a. lower cost b. lower risk of insolvency c. lower funding risks d. no legal liability to pay dividends e. no requirement to repay capital
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which of the following is not an advantage of equity rather than debt financing
a. lower cost
b. lower risk of insolvency
c. lower funding risks
d. no legal liability to pay dividends
e. no requirement to repay capital.
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- (i). Debt investments not plan to sell reported at a. amortized cost. b. fair value. c. the lower of amortized cost of fair value. d. net realizable value. (ii). which of the following caa be reported at fair value? a. Debt investments. b. Equity investments. c. Both debt and equity investments: d None of these answers' choices are correct.Q.Briefly explain the over-investment problem from the perspective of the agency costs between debtholders and equity holders.Which of the following is not a potential source of financial leverage? Group of answer choices Accounts payable. Long-term debt. Interest payable. Common stock.
- Is there a consequence for reported profit or loss if a particular financial instrument, for example, a preference share, is designated as debt rather than equity? Explain the consequence.Which of the following is not a reason for the issuance of long-term liabilities? Debt financing dilutes ownership interest. Debt may be the only available source of funds. Debt financing may have a lower cost. Debt financing offers an income tax advantage.to the individual or company that 3. A security is issues it. to the person who buys it, but A) assets; liabilities B) liabilities; assets C) negotiable; non-negotiable D) non-negotiable; negotiable 4. Adverse selection is a problem related to equity and debt, which comes from A) lenders experience a lack of information about the borrower's potential returns and risks from their investment activities. B) the lender's inability to require sufficient collateral to cover 100% of the loss if the borrower defaults. C) lack of incentives for borrowers to seek loans to finance high-risk investments. D) lack of options on the part of the borrower to obtain funds. 5. The secondary market causes more financial instruments to be... A) Solid. B) Vapids. C) Liquids. D) Risky.
- Short-term debt should be excluded in the estimation of WACC if it is a permanent source of financing. A. True B. False C. Insufficient informationComponents of the cost of risk do not include: A-- the cost of issuing bonds B-- the cost of loss financing C-- the cost of loss control D-- the cost of internal risk reduction E-- the expected cost of losses(1) What factors might lead a company to gainadditional funds through debt financing rather thanthrough equity financing? (2) Why does consumerdebt have a more negative connotation than businessdebt?
- When the profitability of total capital (total assets) is positive, which proposal does it agree with most? The net result may be negative Shareholders may have benefited from the presence of borrowed funds Shareholders may have been harmed by the presence of borrowed funds all of the above2. Which of the following correctly matches the classification of the debt investment with its initial measurement? Classification Initial measurement A. Fair value through other comprehensive income B. Amortized cost C. Fair value through profit or loss Fair value Fair value plus transaction costs Fair value minus transaction costs D. None of the aboveThere are advantages and disadvantages of debt financing in contrast to equity financing. Which of the following is less likely to represent an advantage of debt financing? a. The cost of debt should be lower than the cost of equity for most companies due to the lower risk to the lender and the tax deductibility of interest b. The repayment of debt capital may affect the liquidity of the company c. If the return on assets exceeds the cost of debt, then this will result in a higher return on shareholders’ funds as compared to the return on assets d. The increase in borrowings will not normally affect the voting control of the current shareholders as compared to the issue of shares e. Fixed interest rate loans will result in the variability in the market value of such loans over time which will normally be less than the variability in the value of the equity of the company