Which statement about equity financing is NOT true?

Prepare for your HFMA CSAF test with flashcards and multiple choice questions. Every question includes hints and explanations to boost your understanding and help you succeed on exam day!

The statement that "equity financing is very common in the healthcare industry" is not universally true. While equity financing can be a source of capital for healthcare organizations, it is not as prevalent as in other industries. Many healthcare institutions, particularly non-profit hospitals, rely more heavily on other forms of financing, such as debt or charitable donations. This reliance is often due to the specific financial structures and funding models within the healthcare sector, which may emphasize stability and predictability over the fluctuations associated with equity financing.

In contrast, the other statements accurately reflect common principles of equity financing. Internal equity financing is advantageous because it does not incur additional costs associated with external financing, making it a cost-effective method. External equity financing does occur primarily through the sale of stock, making it a standard practice for corporations seeking to raise capital. Furthermore, increasing equity can bolster a company's balance sheet, making it more attractive to lenders and potentially enhancing the organization's ability to secure debt financing. This creates a cycle of increased financial capacity and viability.

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