A company's Board of Directors is assessing the likely impact of financing new projects by using either debt...

CIMA F3 Question Answer

A company's Board of Directors is assessing the likely impact of financing new projects by using either debt or equity finance.

The impact of using debt or equity finance on some key variables is uncertain.

Which THREE of the following statements are true?

The use of equity finance reduces the company's overall financial risk.

The use of equity finance will create pressure for increases in dividend per share in the future.

The use of debt finance will always result in an increase in earnings per share.

Retained earnings is the cheapest form of equity finance.

The use of debt finance increases the cost of equity.

The use of debt finance is always preferable to equity finance.

CIMA F3 Summary

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