{"id":33713,"date":"2024-04-15T09:20:38","date_gmt":"2024-04-15T09:20:38","guid":{"rendered":"https:\/\/exam.pscnotes.com\/mcq\/?p=33713"},"modified":"2024-04-15T09:20:38","modified_gmt":"2024-04-15T09:20:38","slug":"which-of-the-following-statements-is-correct-for-an-aggressive-financing-policy-for-a-firm-relative-to-a-former-conservative-policy","status":"publish","type":"post","link":"https:\/\/exam.pscnotes.com\/mcq\/which-of-the-following-statements-is-correct-for-an-aggressive-financing-policy-for-a-firm-relative-to-a-former-conservative-policy\/","title":{"rendered":"Which of the following statements is correct for an aggressive financing policy for a firm relative to a former conservative policy?"},"content":{"rendered":"<p>\r\n    <!-- Check if it's an AMP page -->\r\n            <!-- Non-AMP version -->\r\n        <div class=\"mcq-container\" data-quiz-id=\"quizState_6a9a92c93b7e2\">\r\n                                            <div class=\"option\" data-option-key=\"option1\" data-is-correct=\"false\">\r\n                    The firm will use long-term financing to finance all fixed and current assets                <\/div>\r\n                                            <div class=\"option\" data-option-key=\"option2\" data-is-correct=\"false\">\r\n                    The firm will see an increase in its expected profits                <\/div>\r\n                                            <div class=\"option\" data-option-key=\"option3\" data-is-correct=\"false\">\r\n                    The firm will see a decline in its risk profile                <\/div>\r\n                                                                                                                                                                                                                                                                                                                                                                                         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data-feedback=\"wrong\">Answer is Right!<\/div>\r\n            <div class=\"feedback\" data-feedback=\"right\">Answer is Wrong!<\/div>\r\n        <\/div>\r\n\r\n        <script>\r\n        document.addEventListener('DOMContentLoaded', function () {\r\n            var containers = document.querySelectorAll('.mcq-container');\r\n\r\n            containers.forEach(function(container) {\r\n                var options = container.querySelectorAll('.option');\r\n                var feedbackSelect = container.querySelector('[data-feedback=\"select\"]');\r\n                var feedbackWrong = container.querySelector('[data-feedback=\"wrong\"]');\r\n                var feedbackRight = container.querySelector('[data-feedback=\"right\"]');\r\n\r\n                options.forEach(function(option) {\r\n                    option.addEventListener('click', function() {\r\n                        var selectedOption = option.getAttribute('data-option-key');\r\n                        var isCorrect = option.getAttribute('data-is-correct') === 'true';\r\n\r\n                        \/\/ Remove previous selections\r\n                        options.forEach(function(opt) {\r\n                            opt.classList.remove('correct', 'incorrect');\r\n                        });\r\n\r\n                        \/\/ Add the correct\/incorrect class\r\n                        if (isCorrect) {\r\n                            option.classList.add('correct');\r\n                            feedbackRight.hidden = false;\r\n                            feedbackWrong.hidden = true;\r\n                        } else {\r\n                            option.classList.add('incorrect');\r\n                            feedbackRight.hidden = true;\r\n                            feedbackWrong.hidden = false;\r\n                        }\r\n\r\n                        \/\/ Hide select feedback\r\n                        feedbackSelect.hidden = true;\r\n                    });\r\n                });\r\n            });\r\n        });\r\n        <\/script>\r\n    \r\n    <!--more--><\/p>\n<p>The correct answer is D. The firm will need to issue additional common stock in this period to finance the assets.<\/p>\n<p>An aggressive financing policy is a strategy in which a firm uses more debt financing than equity financing. This means that the firm borrows more money from lenders and uses less <div class=\"telegram-channel-container\">\r\n        <a href=\"https:\/\/t.me\/pscnotes2025\" target=\"_blank\" class=\"telegram-channel-button\">\r\n            <span class=\"telegram-icon\">\r\n                <svg xmlns=\"http:\/\/www.w3.org\/2000\/svg\" viewBox=\"0 0 496 512\">\r\n                    <path fill=\"white\" d=\"M248,8C111,8,0,119,0,256s111,248,248,248s248-111,248-248S385,8,248,8z M362,177L320,367c-3,14-10,18-20,14l-56-41l-27,26 c-3,3-5,5-10,5l4-63L323,196c5-5-1-7-8-3l-98,62l-42-13c-9-3-10-9,2-14l162-63C351,160,365,164,362,177z\"\/>\r\n                <\/svg>\r\n            <\/span>\r\n            Join Our Telegram Channel\r\n        <\/a>\r\n    <\/div> of its own money to finance its assets. This can be a risky strategy, as the firm is more likely to default on its loans if its profits decline. However, it can also be a profitable strategy, as the firm can earn a higher return on its assets if its profits are high.<\/p>\n<p>A conservative financing policy is a strategy in which a firm uses less debt financing than equity financing. This means that the firm borrows less money from lenders and uses more of its own money to finance its assets. This is a less risky strategy, as the firm is less likely to default on its loans if its profits decline. However, it can also be a less profitable strategy, as the firm will earn a lower return on its assets if its profits are high.<\/p>\n<p>In the case of an aggressive financing policy, the firm will need to issue additional common stock in this period to finance the assets. This is because the firm will need to raise more money than it can from debt financing. The firm will need to issue new shares of stock to raise this money. This will dilute the ownership of the existing shareholders, as each shareholder will own a smaller percentage of the firm after the new shares are issued.<\/p>\n<p>The other options are incorrect. Option A is incorrect because the firm will not use long-term financing to finance all fixed and current assets. The firm will still use some short-term financing, such as bank loans. Option B is incorrect because the firm will not see an increase in its expected profits. The firm will see an increase in its risk profile, but this does not necessarily mean that its profits will increase. Option C is incorrect because the firm will not see a decline in its risk profile. The firm will see an increase in its risk profile, as it will be more leveraged.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Subscribe on YouTube<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[700],"tags":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v22.2 (Yoast SEO v23.3) - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Which of the following statements is correct for an aggressive financing policy for a firm relative to a former conservative policy?<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/exam.pscnotes.com\/mcq\/which-of-the-following-statements-is-correct-for-an-aggressive-financing-policy-for-a-firm-relative-to-a-former-conservative-policy\/\" \/>\n<meta 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