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Debt instruments subject their owners to risk from​ 1. loss of purchasing power 2. higher credit ratings 3. default

If profit margins increase as sales increase, the need for external finance is reduced.​

A major difference between the net present value and internal rate of return is the interest factor.​

If a firm has retained earnings, it has an equal amount of cash.​

A major difference between the net present value and internal rate of return is the interest factor.​

In general, banks prefer loans that stress liquidity and safety.

In general, banks prefer loans that stress liquidity and safety.

If the cost of capital exceeds the internal rate of return, the firm should not make the investment.​

If the cost of capital exceeds the internal rate of return, the firm should not make the investment.​

Debt financing​ 1. increases stockholders’ return more than an equal dollar amount of preferred stock 2. increases stockholders’ return less than an equal dollar amount of preferred stock3. is less risky to the investor than preferred stock4. is more risky to the investor than preferred stock