Generating capital by means of debt financing:
A) Involves borrowing money, either from a bank loan or from the use of corporate bonds.
B) Means that the firm borrowing the money will have to pay interest charges.
C) May be worth it if the borrowed money is used to implement a marketing plan that earns a return greater than the cost of borrowing the money.
D) Means that the firm will have to put up some of its assets as a loan guarantee.
E) All of these.

Question

Quizplus · Accepted Answer

Debt financing involves borrowing money, either from a bank loan or from the use of corporate bonds, which means that the firm borrowing the money will have to pay interest charges. However, it may be worth it if the borrowed money is used to implement a marketing plan that earns a return greater than the cost of borrowing the money. In order to secure the loan, the firm will have to put up some of its assets as a loan guarantee. Therefore, all of these statements are correct.

Generating Capital by Means of Debt Financing