Question

As a firm progresses through the introduction stage of its life cycle, what type of financial flexible account will it be more likely to use to balance the balance sheet?

a. share repurchases
b. dividends
c. issued equity
d. property, plant

Answer 1

During the introduction stage of its life cycle, a firm is more likely to use issued equity to balance its balance sheet, allowing it to gain capital without committing to fixed payments.The correct option is c.

Step-by-step explanation:

As a firm progresses through the introduction stage of its life cycle and seeks to balance its balance sheet, the type of financial flexibility it would likely need involves raising capital that does not commit it to fixed payments without assured income.

The correct option for a firm at this stage is often 'issued equity.' Issuing equity involves selling shares of the company to the public. This route allows the firm to obtain the capital it needs while avoiding the drawbacks of fixed payment commitments associated with loans or bonds.

By issuing equity, the firm gains access to funds but must also consider the interests of new shareholders and a board of directors.