QUESTION 8 All of the following statements are true except: Companies over the l

Question

QUESTION 8 All of the following statements are true except: Companies over the long run should generate enough cash flow from operations to cover investing and financing activities of the firm. Credit rating agencies often use cash flow adequacy ratios to evaluate how well a company can cover annual payments of items such as debt, capital expenditures, and dividends from operating cash flow. Cash used for dividends should be generated internally by the company, rather than by borrowing. In the long run, borrowing each year to pay dividends and repay debt is a normal cycle which would not concern an analyst.

Explanation / Answer

option D) in the long run, borrowing each year to pay dividends and repay debt is a normal cycle which would not concern an analyst  

actually , there will be concern if each year borrowing is done

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