[amp_mcq option1=”The firm will use long-term financing to finance all fixed and current assets” option2=”The firm will see an increase in its expected profits” option3=”The firm will see a decline in its risk profile” option4=”The firm will need to issue additional common stock in this period to finance the assets” correct=”option4″]<\/p>\n
The correct answer is D. The firm will need to issue additional common stock in this period to finance the assets.<\/p>\n
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 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
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
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
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":"
[amp_mcq option1=”The firm will use long-term financing to finance all fixed and current assets” option2=”The firm will see an increase in its expected profits” option3=”The firm will see a decline in its risk profile” option4=”The firm will need to issue additional common stock in this period to finance the assets” correct=”option4″]<\/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":[],"class_list":["post-33713","post","type-post","status-publish","format-standard","hentry","category-business-finance","no-featured-image-padding"],"yoast_head":"\n