Final answer:
The choice of debt or equity in sequential long-term financing influences the future financial stability of the firm.
Step-by-step explanation:
When a firm is involved in sequential long-term financing, the choice of debt or equity influences the future financial stability of the firm.
Debt financing involves borrowing money from a bank or by issuing bonds. This creates a financial obligation for the firm to make scheduled interest payments, regardless of its income. However, it allows the firm to maintain control of its operations and avoid being subject to shareholders.
Equity financing involves selling stock and giving up ownership of the company to the public. This makes the firm responsible to a board of directors and shareholders. While it reduces control over operations, it can provide access to a larger pool of capital for future growth.