Which ONE of the following options is INCORRECT in relation to company financing?Question 8Answera.Debt Financing involves a company borrowing money from a lender such as a bank or wealthy individual.b.A debenture includes a commitment by a company to repay as a debt money lent to it.c.Companies often engage in a combination of Debt Financing and Equity Financing.d.Debt Financing never involves the lender taking out a security over some or all of the company's assets.
Question
Which ONE of the following options is INCORRECT in relation to company financing?Question 8Answera.Debt Financing involves a company borrowing money from a lender such as a bank or wealthy individual.b.A debenture includes a commitment by a company to repay as a debt money lent to it.c.Companies often engage in a combination of Debt Financing and Equity Financing.d.Debt Financing never involves the lender taking out a security over some or all of the company's assets.
Solution
The incorrect option is d. "Debt Financing never involves the lender taking out a security over some or all of the company's assets." This is incorrect because in many cases, debt financing does involve the lender taking out a security over some or all of the company's assets. This is done to protect the lender's investment, as it allows them to seize those assets if the company is unable to repay the loan.
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