What is the cause of financial risks that are placed on the common stockholders of a firm?
A) Unstable sales volume
B) Uncertain input price
C) Use of fixed-income securities
D) High fixed operating costs
E) Inability to adjust to selling prices

Question

Quizplus · Accepted Answer

The use of fixed-income securities, such as bonds, increases financial risk for common stockholders because these securities require fixed interest payments, which must be made regardless of the firm's financial performance. This can lead to increased financial leverage and risk for equity holders.

What Is the Cause of Financial Risks That Are Placed