Funding

When is debt capital particularly useful for businesses?

• For long-term investments

• For short-term needs

• For reducing taxes

• For hiring new employees

How does debt capital affect corporate credit scores?

• A) It decreases them.

• B) It has no effect.

• C) It boosts them.

• D) It requires profit sharing.

What is one disadvantage of using debt capital?

• It requires no repayment.

• It increases company equity.

• The principal and interest must be paid to lenders.

• It guarantees profit.

When might paying debt capital be particularly challenging?

• During high profit periods

• When profits are scarce

• When interest rates are low

• During economic booms

Why might paying principal and interest be problematic when using debt capital?

• When profits are high

• When profits are scarce

• When interest rates are low

• When the economy is booming

Who becomes stockholders when a company sells ownership stakes?

• Employees

• Customers

• Investors

• Suppliers

What type of financing does not require repayment?

• Debt financing

• Equity capital

• Bank loans

• Credit cards

What is a disadvantage of relying on creditors instead of equity capital?

• No need for repayment

• Increased debt

• More investor involvement

• Easier to obtain

Why might equity capital be considered expensive?

• It requires high interest payments

• It involves high administrative costs

• Investors may expect a share in profit

• It leads to increased debt

What is one reason equity capital might be used by startups?

• To avoid paying taxes

• To bring in venture capitalists

• To increase debt

• To reduce operational costs