The managers at Bally Manufacturing decided to borrow money to finance a new production facility. The loan agreement they signed required that they pay 10 percent interest on the loan. Based on this information, which of the following statements is true?
A) Bally doesn't have to pay the 10 percent if the firm isn't profitable.
B) Bally can pay the 10 percent whenever its managers vote to pay it.
C) The company will make more money if the firm earns less than a 10 percent return on its investment in the new plant.
D) Bally is using financial leverage to increase profits as long as the firm earns more than the 10 percent it pays to borrow the money required to finance the new plant.
E) Even if the new plant is extremely profitable, Bally should have found another way to finance the new plant.
Correct Answer:
Verified
Q117: For a corporation, equity capital is obtained
Q118: The NASDAQ, part of the _ market,
Q119: As a stockholder in the Giant Plants
Q120: How many times can a corporation's stock
Q121: Which of the following firms is most
Q123: A venture capital firm
A) provides financing to
Q124: Retained earnings are
A) all the earnings of
Q125: The use of borrowed funds to increase
Q126: The type of corporate ownership that has
Q127: Burberry Mills sold stock to an insurance
Unlock this Answer For Free Now!
View this answer and more for free by performing one of the following actions
Scan the QR code to install the App and get 2 free unlocks
Unlock quizzes for free by uploading documents