Companies that are believed to have high bankruptcy risk generally receive higher credit ratings and pay a lower interest rate for borrowing.

Question

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Companies that are believed to have high bankruptcy risk generally receive low credit ratings and must pay a higher interest rate for borrowing. This is because lenders view these companies as having a higher likelihood of defaulting on their loans, so they require a higher return to compensate for the added risk.

Companies That Are Believed to Have High Bankruptcy Risk Generally