Questions and Answers
What is the primary reason why equity shareholders may prefer debt financing over issuing additional equity shares?
To avoid diluting their control over the firm
Which of the following is a result of using debt financing, according to the concept of financial risk?
Additional risk placed on the ordinary equity shareholders
When is debt financing preferable to equity financing from the earnings per share (EPS) point of view?
When the earnings before income tax (EBIT) is high
What is the result of financial leverage when the return on assets (ROA) is less than the cost of debt?
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Which of the following factors is considered in capital structure decisions due to its impact on the firm's earnings per share and return on equity?
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