Final answer:
In the decline phase of a firm's life cycle, it is more likely to use issued debt to balance its balance sheet because it allows for financial flexibility without diluting control or ownership.
Step-by-step explanation:
As a firm progresses through the decline life-cycle stage, it is more likely to use issued equity to balance the balance sheet. When a firm is in the decline stage of its life cycle and needs to balance the balance sheet, issuing debt is a more flexible option than growth-related assets, issuing equity, or stock repurchase.
Issued debt, such as borrowing from banks or issuing bonds, offers advantages due to its flexibility in times of insufficient income. Unlike issuing equity, it enables a firm to maintain control without diluting ownership among new shareholders. Moreover, relying on issued debt does not commit the firm to shareholder expectations or influence as would be the case with stock repurchase or expansion through growth assets. This flexibility is critical during the decline phase, as it allows the firm to manage its finances more cautiously.