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. 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. the main advantage of equity financing is that there is no obligation to repay the money acquired through it. equity financing places a large financial burden on the company.

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

Answer

Brief Explanations:

  1. Debt financing involves borrowing money (e.g., through loans), and equity financing involves selling a portion of the company (e.g., issuing shares), so the first statement is true.
  2. Creditors prefer a low debt - to - equity ratio as it indicates lower financial risk, which benefits the company when seeking more debt financing, so the second statement is true.
  3. With equity financing, there is no legal obligation to repay the funds received from selling equity, so the third statement is true.
  4. Equity financing can dilute ownership and may have long - term implications for control and profit - sharing, but it doesn't place an immediate repayment obligation like debt financing. However, it is not accurate to say it places a large financial burden in the traditional sense of repayment, so this statement is false.

Answer:

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