Question

An advantage of debt financing is that:

a. it does not require firms to make fixed payments.
b. it does not require firms to sell stock to new investors to gain additional funds.
c. it is less risky than equity financing.
d. it is more flexible than equity financing.

Answer 1

Debt financing does not require firms to sell stock to new investors to gain additional funds, allowing them to maintain control and decision-making autonomy.

Step-by-step explanation:

An advantage of debt financing is that it does not require firms to sell stock to new investors to gain additional funds. When a firm chooses debt financing, it borrows money from a bank or issues bonds, allowing it to raise capital without diluting ownership or control. This can be particularly beneficial for firms that want to maintain autonomy and make decisions without interference from shareholders.