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. the main advantage of equity financing is that there is no obligation to repay the money acquired through it. debt financing requires borrowing money whereas equity financing requires selling a portion of the company. 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. equity financing places a large financial burden on the company. true false

for each statement about requirements for equity vs debt financing, select true or false. note: you will receive partial credit for each correct selection. the main advantage of equity financing is that there is no obligation to repay the money acquired through it. debt financing requires borrowing money whereas equity financing requires selling a portion of the company. 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. equity financing places a large financial burden on the company. true false

Answer

Brief Explanations:

  • For the first statement: In equity financing, shareholders do not have a legal obligation to be repaid like debt - holders, so it's true.
  • For the second statement: Debt financing involves borrowing money with an obligation to repay, while equity financing means selling ownership stakes in the company, so it's true.
  • For the third statement: A low debt - to - equity ratio makes a company less risky in creditors' eyes, facilitating future debt financing, so it's true.
  • For the fourth statement: Equity financing doesn't create a repayment obligation like debt financing, so it doesn't place a large financial burden in the same sense, so it's false.

Answer:

  1. True
  2. True
  3. True
  4. False