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Debt financing is more risky for firms than preferred stock financing because

When cash is deposited in a checking account, the reserves of commercial banks are increased.​

The sum of a firm’s liabilities and equity equals the sum of its assets.​

According to accountants, assets should be recorded at

If a firm must issue subordinated debentures instead of equipment trust certificates, the marginal cost of capital may rise even though the optimal capital structure is maintained.

The cost of equity​ 1. is less than the cost of debt2. is greater than the cost of debt3. depends on the riskiness of the firm4. depends on the firm’s current ratio

Even if the interest rate is only 1%, a lump sum of $1,000 today is preferred to $100 a year for 10 years.​

A firm may retire bonds by purchasing the debt in the secondary markets.​

If a firm must issue subordinated debentures instead of equipment trust certificates, the marginal cost of capital may rise even though the optimal capital structure is maintained.

A firm may retire bonds by purchasing the debt in the secondary markets.​