CFA Practice Question

There are 131 practice questions for this study session.

CFA Practice Question

When management chooses to raise new capital through the issuance of debt instead of equity, they might be signaling that they think:

A. the debt is over-valued.
B. the stock is over-valued.
C. the stock is under-valued.
Correct Answer: C

Management would likely be sending a signal that the stock is undervalued.

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.
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