Issuing ________ increases a firm's debt and may adversely affect the financial community's perception of the firm.

Question

Quizplus · Accepted Answer

Issuing bonds increases a firm's debt because bonds are a form of long-term debt financing. This increase in debt may cause the financial community to view the firm as riskier since the firm will have to make interest payments on the bonds and eventually repay the principal. Common stock and retained earnings do not increase a firm's debt, and preferred stock is a type of equity financing that does not increase debt but may still affect the perception of the financial community depending on the terms of the preferred stock issuance.

Issuing ________ Increases a Firm's Debt and May Adversely Affect