for each statement about requirements for equity vs debt financing, select true or false. note: you will…

for each statement about requirements for equity vs debt financing, select true or false. note: you will receive partial credit for each correct selection. equity financing places a large financial burden on the company. debt financing requires borrowing money whereas equity financing requires selling a portion of the company. the main advantage of equity financing is that there is no obligation to repay the money acquired through it. creditors look favorably upon a relatively low debt - to - equity ratio, which benefits the company if it needs to access additional debt financing in the future.

for each statement about requirements for equity vs debt financing, select true or false. note: you will receive partial credit for each correct selection. equity financing places a large financial burden on the company. debt financing requires borrowing money whereas equity financing requires selling a portion of the company. the main advantage of equity financing is that there is no obligation to repay the money acquired through it. creditors look favorably upon a relatively low debt - to - equity ratio, which benefits the company if it needs to access additional debt financing in the future.

Answer

Brief Explanations:

  • Equity financing doesn't place a large financial burden like debt financing (interest payments). So the first statement is false.
  • Debt financing involves borrowing money and equity financing involves selling company shares. This is correct.
  • With equity financing, there's no obligation to repay the funds received from selling equity. This is correct.
  • Creditors prefer a low debt - to - equity ratio as it indicates lower risk for them. This is correct.

Answer:

  • Equity financing places a large financial burden on the company: False
  • Debt financing requires borrowing money whereas equity financing requires selling a portion of the company: True
  • The main advantage of equity financing is that there is no obligation to repay the money acquired through it: True
  • Creditors look favorably upon a relatively low debt - to - equity ratio, which benefits the company if it needs to access additional debt financing in the future: True