Final answer:
The claim that long-term debt financing is normally used to provide working capital is false; it is typically used for long-term investments. Working capital is financed through short-term sources. Firms also consider how the selected financing will affect control over their operations.
Step-by-step explanation:
The statement that long term debt financing is normally used to provide working capital to finance inventory, accounts receivable, & operation of the business is false. Long term debt is typically used to finance more permanent or fixed assets such as machinery, land, or buildings. Working capital, on the other hand, refers to the funds needed to cover the day-to-day expenses of running a business, which commonly include inventory and accounts receivable. It is often financed through short-term sources such as a line of credit or short-term loans.
When a firm chooses how to access financial capital, it can opt to borrow from banks, issue bonds, or sell stock. Long-term debt, like bank loans and bonds, obligates the firm to scheduled interest payments, but it allows the company to retain control over its operations without being answerable to shareholders. Meanwhile, issuing stock results in selling off a part of the ownership of the company and becoming responsible to a board of directors and the shareholders.