A market in which corporations raise funds through new issues of securities is r

Question

A market in which corporations raise funds through new issues of securities is referred to as a:

dealer market

2. All else the same, firms facing relatively high tax rates should:

none of these.

3. Which of the following is the condition in which a firm is near bankruptcy?

primary market. spot market. venture market.

dealer market

2. All else the same, firms facing relatively high tax rates should:

use more debt. use less debt. have lower E/E ratios.

none of these.

3. Which of the following is the condition in which a firm is near bankruptcy?

Financial distress Call position Active capital structure Passive capital structure

Explanation / Answer

(A) Primary market is part of capital market that deals with issuing of new securities of corporation.

(B) If firms facing relatively high tax rates then they should use more debt. As interest on debt is tax deductible which will reduce the companies taxable profit as a result lower tax rates.

(C) Financial distress is the condition where firms do not able to make the payments to their creditor or pay in difficulties, if this situation continues for a while then it can lead to bankruptcy of the firm.

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