Everything else equal, if a firm shifts its capital structure to include more debt than before the shift, then the firm's business risk should
A) increase because the degree of financial leverage increases.
B) decrease because the degree of operating leverage decreases.
C) not change because capital structure decisions should affect the firm's financial risk, not its business risk.
D) not change because, although additional ordinary shares will increase financial risk, the business risk should decrease by the same amount.
Correct Answer:
Verified
Q3: If a firm's degree of total leverage
Q9: Considering each action independently and holding other
Q67: For a particular product, Sandbarr Corporation has
Q68: Which of the following statements is correct?
A)
Q71: The Price Company will produce 55,000 widgets
Q73: All else equal, which of the following
Q75: Which of the following statements is correct?
A)
Q162: If a firm has a degree of
Q166: By definition, a firm's operating breakeven point
Q178: All else equal, one firm will have
Unlock this Answer For Free Now!
View this answer and more for free by performing one of the following actions
Scan the QR code to install the App and get 2 free unlocks
Unlock quizzes for free by uploading documents