Question

Which of the following is NOT a likely financing policy for a rapidly growing business?

I. If external financing is necessary, use debt to the point it does not affect financial flexibility.
II. Maintain an aggressive leverage ratio to enjoy interest tax shields and inject additional discipline in respect to management incentives.
III. Borrow funds rather than limit growth, thereby limiting growth only as a last resort.
IV. Adopt a modest dividend payout policy that enables the company to finance most of its growth internally.

       I only
       II and III only
       I, II and III
       II only
       III only

Answer 1