The less a firm's business risk, the ____ the amount of ____ that will be used in the optimal capital structure, holding constant all other relevant factors.
A) less; financial leverage
B) more; financial leverage
C) less; equity capital
D) more; debt capital

Question

Quizplus · Accepted Answer

The less a firm's business risk, the more financial leverage (debt) it can use in its optimal capital structure because it can handle the fixed obligations associated with debt more comfortably.

The Less a Firm's Business Risk, the ____ the Amount