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Basic Question 9 of 15
When management chooses to raise new capital through the issuance of debt instead of equity, they might be signaling that they think:
B. the stock is over-valued.
C. the stock is under-valued.
A. the debt is over-valued.
B. the stock is over-valued.
C. the stock is under-valued.
User Contributed Comments 3
| User | Comment |
|---|---|
| sarath | MORE DEBT => MGMT THINKS UNDER-VALUED STOCK .. |
| katybo | you don't want to share profits...so issue debt rather than equity |
| ericczhang | If you think your stock was overvalued, you might actually want to share profits that other people pay too much to get a piece of. |
I just wanted to share the good news that I passed CFA Level I!!! Thank you for your help - I think the online question bank helped cut the clutter and made a positive difference.
Edward Liu
Learning Outcome Statements
describe optimal and target capital structures
CFA® 2024 Level I Curriculum, Volume 2, Module 6.