If a firm relies too heavily on ________ for financing it may send a signal to the market that its stock is overvalued, at which point investors may sell the stock, decreasing the price of the stock.

Question

Quizplus · Accepted Answer

When a firm relies too heavily on equity for financing, it may signal to the market that its stock is overvalued. This perception can lead investors to sell the stock, which in turn decreases the price of the stock.

If a Firm Relies Too Heavily on ________ for Financing