The existence of asymmetric (insider) information makes it desirable for firms to: maintain a reserve borrowing capacity by using less debt than is optimal. use less equity than optimal so that they can issue stock whenever they need. always maintain an optimal mix of debt and equity.
The existence of asymmetric (insider) information makes it desirable for firms to: maintain a reserve borrowing capacity by using less debt than is optimal. use less equity than optimal so that they can issue stock whenever they need. always maintain an optimal mix of debt and equity.
Financial Reporting, Financial Statement Analysis and Valuation
8th Edition
ISBN:9781285190907
Author:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
Publisher:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
Chapter5: Risk Analysis
Section: Chapter Questions
Problem 2QE
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Question
The existence of asymmetric (insider) information makes it desirable for firms to:
|
maintain a reserve borrowing capacity by using less debt than is optimal. |
|
use less equity than optimal so that they can issue stock whenever they need. |
|
always maintain an optimal mix of debt and equity. |
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