Debt allows an economy to appear very large but debt also creates more ____ in an economy. Inevitability Surety Certainty Risk Business

Q: Do you agree with the statement: "Investors view debt as a signal of firm value"? Why? Briefly…

A: Debt is the amount of money that is owed by an organization to a third party, that is, the amount of…

Q: If a firm’s ROE is low and management wants to improve it, explain how using more debtmight help.

A: ROE refers to return on equity.It is a measure of profitability of a firm with respect to its…

Q: The principle of gearing 2. Why debt is cheaper than equity 3. What the effect will be on the risk…

A: Gearing is the debt-to-equity relationship or ratio of a firm. Gearing indicates how much of a…

Q: How does a firm's use of short-term debt as opposed to long-term debt subject the firm to a greater…

A: The given statement is that short-term debt leads to illiquidity as opposed to long-term debt. The…

Q: Financing with Debt Versus Equity. It is commonly understood that the cost of financing a…

A: For any entity, there are two ways of raising funds: Equity Financing and Debt Financing. Companies…

Q: In which way CDOs can create a liquidity squeeze in the financial markets

A: The financial market is a market where people trade financial securities and derivates. The…

Q: How do corporate borrowers use interest rate or cross-currency swaps to reduce reduce the costs of…

A: Optimum Capital Structure Occasionally, some financial restructuring is required by a company to…

Q: It is often argued that debt becomes a more attractive mode of financing than equity as interest…

A: Debt refers to funds that are raised by an entity by generating outside liability for which entity…

Q: We think of banks as being interest rate intermediaries. That is, the borrow cheaply, and then lend…

A: Following are the types of risk faces by banking industry other than interest rate:

Q: High-risk High return is one of the laws in finance, what does that law really mean? Is there a way…

A: Risk-Return trade off is the theory which explains that greater is the risk of investing in a…

Q: A company needs financing. The CFO is proposing that her company issues debt rather than equity,…

A: 1. The CFO wants to take advantage of the prevailing low-interest rates with a view of taking…

Q: Is it correct to state that banks’ returns will be higher if interest rates increase? Outline the…

A: The duration analysis is the method through which the financial institutions determine the change in…

Q: “Financial intermediaries play a crucial role in an economic crisis–they are responsible for both…

A: A financial intermediary is a middlemen between a financial transaction. Examples of financial…

Q: financial intermediaries play a crucial role in an economic crisis-they are responsible for both…

A: Financial intermediaries: Financial intermediaries are organization which are acts as a link between…

Q: Political stability is a major factor of which one of the following? business risk inflation risk…

A: "Hi, Thanks for the Question. Since you asked multiple questions, we will answer first question for…

Q: Short-term loan from banks is not an example about debt capital. Select one: O True O False

A: A short-term loan is a type of loan that is obtained to support a temporary personal or business…

Q: Financial markets promote economic efficiency by * A.channeling funds from investors to savers. B.…

A: Answer  -    The financial system performs the essential economic function of channeling the funds…

Q: How banks can improve their return on equity and what are its negative externalities.

A: RoE is ubiquitous in banks, serving as both an indicator of overall performance and a means of…

Q: A. Briefly explain the problem of moral hazard in: (i) Equity financing (ii) Debt financing B.…

A: When there is an rise in the expected loss because of individuals and companies behaving carelessly,…

Q: When borrowers tend to pay back the loans to bankers earlier, the bank is facing a. Repricing risk O…

A: Since, more than one different questions are posted, answer for the first question is only provided…

Q: Which is the quickest way to determine whether a firm has too much debt?

A: A business is supposed to be overleveraged when it is conveying an excessive amount of debt when…

Q: 2. The Trade-OfT Model A. "The trade-off model of debt financing implies that an increase in the…

A: As you have asked multiple questions, we will solve the first question as per the policy of…

Q: All things considered stable cash flows enable higher debt borrowing.

A: Cashflows: These are movement of the money from various sources like operations, investment…

Q: Tirole’s model of moral hazard associated with external financing (whether debt or equity) has…

A: A moral hazard develops when there is disproportionate knowledge between two parties and a shift in…

Q: Debt-deflation leads to lower income because: O falling prices redistribute income from debtors to…

A: Debt deflation is an economic theory. It occurs when fall in prices leads to increase of debt burden…

Q: EBITDA makes companies with asset-heavy balance sheets look healthier than they may actually be.•…

A: It is abbreviation for Earnings Before Interest, tax , Depreciation, and Amortization. It is used to…

Q: Assume that the risk-free rate increases, but the market risk premium remains constant. What impact…

A: The cost of debt is the productive interest rate paid by an undertaking on its debts. It is interest…

Q: The deterioration of the balance sheet of financial institutions leads to : a. a deleveraging…

A: Effect of deterioration on the balance sheet of financial institutions: When a financial…

Q: ial Markets he

A: Help of financial markets : For the both private and public sector enterprises, the financial market…

Q: Financial intermedires play a crucial role in an economic crisis they are responbile for both…

A: Financial intermediaries are the middle person between the financial market and the investors. They…

Q: Explain why a capital market is needed when the banking system stagnates in financial markets?

A: Capital market is a market for equity shares and long-term debt. It describes any exchange…

Q: The central bank takes action that lowers interest rates dramatically. what is the effect of it to…

A: Borrowings are the liability of the company which is used to finance the requirement of the funds.…

Q: Why is it that oftentimes banks refuse to lend to many borrowers even though they offer high…

A: Analysis of the given option: i) To reduce the exposure to diversification risk Remark-By…

Q: How do you think financial institutions help financial market to work?

A: fInancial institutions -The firms and organizations involved in the collection and distribution of…

Q: How might valuation ratios be expected to respond to an interest rate increase generated by an…

A: Inflation refers to the general increase in price of goods and services in an economy.  Valuation…

Q: An advantage financial institutions have over individual household investors is that they are able…

A: Investors have different options to make investments, and the motive behind investments is to…

Q: What is the diferrence between finanical institutions  and financial markets and  Can they both run…

A: There is a huge difference between financial institutions and financial markets. One thing similar…

Q: Which of the following statements best describes financial markets? Answer a. Financial markets are…

A: A financial market is a market in which people exchange financial securities, derivatives, stocks…

Q: Minsky’s instability hypothesis

A: Hyman Minsky was a famous American economist.