- CFA Exams
- CFA Level I Exam
- Topic 3. Corporate Issuers
- Learning Module 4. Working Capital and Liquidity
- Subject 3. Managing Working Capital and Liquidity
CFA Practice Question
Which statement is FALSE?
A. Private equity firms tend to have lower agency costs than publicly traded firms.
B. In general, floatation costs (as a percentage of capital raised) are lower for debt offerings than for equity offerings.
C. If inflation is expected to decline, companies would prefer to borrow at a fixed rate.
Explanation: A is true: This is due to the extent of managers and shareholders.
B is true: Companies must consider the impact these fees will have on how much capital they can raise from a new issue.
C is false: They would prefer a variable rate.
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