A firm can only issue debt or equity as a source of finance. It cannot issue both at the same time.

True

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False

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Solution

The correct option is B False
False.
Firm can issue equity and debt at the same time.
Debt financing is capital acquired through the borrowing of funds to be repaid at a later date. Common types of debt are loans. The benefit of debt financing is that it allows a business to leverage a small amount of money into a much larger sum, enabling more rapid growth than might otherwise be possible.
Equity financing refers to funds generated by the sale of stock.

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Similar questions

Q. Bonus Shares can be issued only to equity shareholders.

"During annual general meeting of Prakash Ltd. Ceo, Mr. Rajesh put the expansion plan for the coming year before shareholders and asked for a suitable source of finance to finance manger. Finance manager Mr. Kant proposed the issue of debentures than equity with a plan that they can be paid back whenever requirement of funds is over." In the above paragraph, which component affecting financing decision has been highlight?

Q. Debt to Equity Ratio of a company is 0.5:1. Which of the following suggestions would increase, decrease or not change it:

(i) Issue of Equity Shares:	(ii) Cash received from debtors:
(iii) Redemption of debentures;	(iv) Purchased goods on Credit?

Q. "During annual general meeting of Prakash Ltd CEO, Mr. Rajnesh put the expansion plan for the coming year before shareholders and asked for suitable source of finance to finance manager. Finance manager Mr. Kant proposed issue of debentures than equity with a plan that they can be paid back whenever requirement of funds is over."
In the above paragraph, which component affecting financing decision has been highlighted?

Explain the component?

Assuming that the Debt-Equity Ratio is 2 : I, state, giving reasons, which of the following transactions would (I) Increase; (ii) Decrease; (ii.) Not alter the Debt-Equity Ratio :

(i) Issue of new shares (Preference/Equity) for Cash.

(ii) Issue of new shares (Preference/Equity) against purchase of fixed asset.

(iii) Buy-back of its own shares by a Company.

(iv) Issue of Debentures for Cash.

(v) Issue of Debentures against purchase of fixed asset.

(vi) Repayment of Long-term Borrowings.

(vii) Conversion of Debentures into Equity Shares/Preference Shares.

(viii) Sale of a fixed asset at par.

(ix) Sale of a fixed asset at profit.

(x) Sale of a fixed asset at loss.

(xi) Purchase of a fixed asset on a credit of 2 months.

(xii) Purchase of a fixed asset on long-term deferred payment basis.

(xiii) Issue of Bonus Shares.

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