Which of the following statements is FALSE in regard to borrowing money?
A) In general, the greater the risk associated with a loan the greater the interest rate charge will be.
B) Interest expense on a loan may impact prices and profits.
C) Borrowing money is usually less expensive than reinvesting cash generated from operations.
D) A company with a successful marketing strategy has its own internal source of funds--profits.
E) None of the above is false.

Question

Quizplus · Accepted Answer

Borrowing money is not always less expensive than reinvesting cash generated from operations. It depends on the interest rate and cost of capital. If the interest rate is high, borrowing may be more expensive than reinvesting cash from operations. Additionally, if a company has a low cost of capital and is generating significant cash flow, it may be more cost-effective to reinvest cash rather than borrow money.

Which of the Following Statements Is FALSE in Regard to Borrowing