Which one of the following is a result of a company issuing common stock instead of debt to finance the purchase of property?
A)Leverage will be more effective.
B)The company will probably experience cash flow problems.
C)It will have a lower debt/equity ratio.
D)It will report a lower net income.

Question

Quizplus · Accepted Answer

Issuing common stock instead of debt will not increase the company's debt, so the debt/equity ratio will decrease. Leverage will not be more effective because there is no debt to leverage, and there is no reason to anticipate cash flow problems or a lower net income.

Which One of the Following Is a Result of a Company