As a firm progresses through the growth life-cycle stage,what type of flexible account will it be more likely to use to balance the balance sheet?
A) issued debt
B) paying down of debt
C) dividends
D) stock buy-backs

Question

Quizplus · Accepted Answer

As a firm progresses through the growth stage, it requires more capital to fund its expansion activities. Issuing debt is a flexible account that can provide the necessary capital without diluting ownership or reducing cash reserves. Additionally, as the firm grows, it will likely have more assets and higher revenues, which can be used as collateral for the issued debt. Paying down debt (B) would not serve the purpose of balancing the balance sheet in this scenario, as the company needs more capital for growth. Dividends (C) and stock buy-backs (D) are more suitable for mature companies, which have excess cash reserves and do not require additional capital for expansion activities.

As a Firm Progresses Through the Growth Life-Cycle Stage,what Type