A corporation issued common stock instead of debt to finance the purchase of non-depreciable property. Which statement is true?

Question

Quizplus · Accepted Answer

By issuing common stock, the corporation is diluting the ownership of existing shareholders. They now own a smaller percentage of the company. The other options are not necessarily true - the debt/equity ratio could stay the same or decrease, income tax expense could increase or stay the same, and net income could stay the same or increase depending on the specifics of the situation.

A Corporation Issued Common Stock Instead of Debt to Finance