Consider the following two potential transactions: (i) borrow from a bank; and (ii) use the proceeds from borrowing to pay out dividend. Assume this is an NFA firm. The combination of two financial transactions will A. reduce the financial leverage (FLEV) and the firm will continue to be an NFA firm. B. reduce the financial leverage (FLEV) and the firm will switch to an NFO firm. C. increase the financial leverage (FLEV) and the firm may become be an NFO firm. D. increase the financial leverage (FLEV) and the firm cannot be an NFA firm anymore.

Consider the following two potential transactions: (i) borrow from a bank; and (ii) use the proceeds from borrowing to pay out dividend. Assume this is an NFA firm. The combination of two financial transactions will A. reduce the financial leverage (FLEV) and the firm will continue to be an NFA firm. B. reduce the financial leverage (FLEV) and the firm will switch to an NFO firm. C. increase the financial leverage (FLEV) and the firm may become be an NFO firm. D. increase the financial leverage (FLEV) and the firm cannot be an NFA firm anymore.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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