A firm's treasurer likes to be in a position to raise funds to support operations whenever such funds are needed,even in "bad times".This is called "financial flexibility," and the lower the firm's debt ratio,the greater its financial flexibility,other things held constant.

Question

Quizplus · Accepted Answer

This is true,because if times are bad--which is when financial flexibility is important--investors are much more willing to lend a firm money than to buy its stock,because if the firm fails,debt holders are first in line to get their money back.

A Firm's Treasurer Likes to Be in a Position to Raise