Final answer:
In the growth life-cycle stage of a firm, additional debt is often used to balance the balance sheet, offering flexibility by maintaining control of operations without diluting ownership.
Step-by-step explanation:
As a firm progresses through the growth life-cycle stage, it is more likely to use additional debt as a flexible account to balance the balance sheet. The most direct answer to this question is d. additional debt. A firm in the growth phase needs financial capital to fund expansion and seize market opportunities. Borrowing allows a company to maintain control of its operations without diluting ownership through issuing additional stock. This is especially true if the firm is not generating sufficient profits to justify the payment of dividends or to engage in stock buy-backs.
While borrowing entails making interest payments, it does not commit the firm to regular payouts to shareholders as dividends would, nor does it reduce outstanding shares and potentially increase share price as stock buy-backs do. The decision between using debt or equity financing involves analyzing the cost of capital, control considerations, and the state of the company's balance sheet. In the growth stage, a firm might find that taking on additional debt is more advantageous as it strives for expansion while maintaining ownership control.