Which of the following statements is true ? (A) There is no restriction on a company to be an all debt company. Debt can be raised even without any equity base in the company (B) Debt can be raised by a company only on a

CS Executive · Financial and Strategic Management · PYQS · December 2022
Which of the following statements is true ? (A) There is no restriction on a company to be an all debt company. Debt can be raised even without any equity base in the company (B) Debt can be raised by a company only on an adequate equity base which serves as a cushion for debt financing (C) The component of debt and equity mix in capital structure has been prescribed by the Companies Act, and it is mandatory for companies to adhere to it. (D) All the above are false.
(A) There is no restriction on a company to be an all debt company. Debt can be raised even without any equity base in the company
(B) Debt can be raised by a company only on an adequate equity base which serves as a cushion for debt financing
(C) The component of debt and equity mix in capital structure has been prescribed by the Companies Act, and it is mandatory for companies to adhere to it.
(D) All the above are false.

Answer & Explanation:

Correct Answer: Option (B)

Official answer key: (B).

Topics: Financial Management

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