Assume that the president of Freeman Industries, Inc. made the following statement in the Annual Report to Shareholders.

"The founding family and majority shareholders of the company do not believe in using debt to finance future growth. The founding family learned from hard experience during Prohibition and the Great Depression that debt can cause loss of flexibility and eventual loss of corporate control. The company will not place itself at such risk. As such, all future growth will be financed either by stock sales to the public or by internally generated resources."

Required (1 paragraph each):

1. As a public shareholder of this company, how would you respond to this policy?

2. Give some reasons for a company to use debt financing.

3. Give some reasons for a company to use equity financing.