If a firm finances with equity rather than debt, net income will be greater because
A) equity financing almost always leads to better firm performance than debt financing.
B) the terms of equity financing are more stable than the terms of debt financing.
C) this impacts asset selection for the better.
D) there is no interest expense.

Question

Quizplus · Accepted Answer

If a firm finances with equity rather than debt, there is no interest expense, which means that net income will be greater. This is because interest expense is subtracted from revenue to calculate net income, so the absence of interest expense will directly increase net income.

If a Firm Finances with Equity Rather Than Debt, Net