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A corporation is looking to take advantage of market conditions and begin expanding as soon as possible. To do so, the company requires cash to purchase new buildings, machinery, and other capital goods. What should the directors keep in mind as they consider the type of funding to pursue?(1 point)
Involving a bank will likely make borrowing more expensive.
Banks will likely offer disappointingly low interest rates.
The types of saving accounts a bank offers.
Changes in the stock market.
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Changes in the stock market.
Why: market conditions (e.g., current share price and investor sentiment) affect whether issuing equity or taking on debt is more attractive — if the stock price is high, issuing new shares is cheaper for the firm; if prices are low, debt may be preferred.
Why: market conditions (e.g., current share price and investor sentiment) affect whether issuing equity or taking on debt is more attractive — if the stock price is high, issuing new shares is cheaper for the firm; if prices are low, debt may be preferred.
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