Issuing debt instead of new equity in a closely held firm more likely causes own

ID: 2764751 • Letter: I

Question

Issuing debt instead of new equity in a closely held firm more likely causes owner-managers to:

a. work harder than they would if equity had been issued.

b. consume more perquisites because the cost is passed on to the debtholders. *(this answer was wrong)*

c. enjoy more leisure time than they would with an equity issue.

d. accept more unprofitable projects.

e. shirk their duties as they have less capital risk.

Issuing debt instead of new equity in a closely held firm more likely causes owner-managers to:

a. work harder than they would if equity had been issued.

b. consume more perquisites because the cost is passed on to the debtholders. *(this answer was wrong)*

c. enjoy more leisure time than they would with an equity issue.

d. accept more unprofitable projects.

e. shirk their duties as they have less capital risk.

if comopany issue equity instead of debt then capital risk for comoany would be less.

So option (e) is correct answer.

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