Which of the following statements is most likely true of a company that relies mainly on equity financing?
A) It has to agree to burdensome covenants to acquire equity funds.
B) It forgoes the opportunity to use financial leverage.
C) It yields the same tax benefits as that of a company that relies only on debt financing.
D) It imposes required payments on stockholders.

Question

Quizplus · Accepted Answer

Equity financing does not involve debt, so the company does not benefit from financial leverage, which is the use of borrowed funds to increase potential returns.

Which of the Following Statements Is Most Likely True of a Company