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Questions and Answers
What is the consequence of overcapitalization in a company?
What is the consequence of overcapitalization in a company?
- Reduction in interest payments
- Efficient use of resources
- Inefficient use of resources (correct)
- Increased return on equity
Which scenario best describes balanced capitalization?
Which scenario best describes balanced capitalization?
- A tech startup obtaining insufficient funding
- A company relying entirely on debt for financing
- A company securing funding far beyond its needs
- A manufacturing company carefully assessing its capital needs (correct)
What is undercapitalization in a company?
What is undercapitalization in a company?
- Exceeding the actual capital requirements
- Achieving the right balance between debt and equity
- Insufficient capital to meet operational needs (correct)
- Having no need for external funding
Which best describes equity capital?
Which best describes equity capital?
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What is debt capital in a company?
What is debt capital in a company?
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In terms of capital gearing, what does it mean to be highly geared?
In terms of capital gearing, what does it mean to be highly geared?
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What is the primary issue with overcapitalization?
What is the primary issue with overcapitalization?
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How does undercapitalization impact a company's operations?
How does undercapitalization impact a company's operations?
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'Balanced Capitalization' is achieved when:
'Balanced Capitalization' is achieved when:
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'Debt-Equity ratio' refers to:
'Debt-Equity ratio' refers to:
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