Asked by Claire Fledderman on Jul 21, 2024
Verified
In Scenario 9-1, the primary disadvantages of using debt financing are all but which of the following?
A) it increases risk due to the possibility of insolvency
B) it allows a voice in management of the business
C) it has to be repaid
D) leverage can enable returns to be lessened
Debt Financing
The use of borrowed funds to finance a business.
Insolvency
The financial state in which an individual or company cannot meet their due debt obligations due to a lack of sufficient assets or funds.
Leverage
The use of borrowed capital or financial derivatives to increase the potential return of an investment.
- Uncover the myriad types of financial resources offered to small enterprises, particularly debt and equity financing.
- Appreciate the importance of a firm's financial vigor and the pivotal role of assets and collateral in ensuring access to borrowings.
Verified Answer
CO
Clara OwensJul 21, 2024
Final Answer :
B
Explanation :
Debt financing does not typically allow lenders a voice in the management of the business; this is more characteristic of equity financing, where investors may have a say in business operations.
Learning Objectives
- Uncover the myriad types of financial resources offered to small enterprises, particularly debt and equity financing.
- Appreciate the importance of a firm's financial vigor and the pivotal role of assets and collateral in ensuring access to borrowings.