What dictates that equity capital safeguards a company when sales are inconsistent? Question 11Answer a. Stability of sales b. Market conditions c. Interest rate fluctuations d. Liquidity preferences
The correct answer is a. Stability of sales.
Equity capital provides a buffer for a company during periods of inconsistent sales, as it does not require fixed repayments like debt. When sales are stable, a company can better manage its expenses and obligations, making equity capital a safeguard during fluctuations in revenue.