A firm accepts the risk of fixed-cost financing is to:
A)increase stock sales.
B)decrease overhead costs.
C)increase possible returns to stockholders.
D)develop synergy.

Question

Quizplus · Accepted Answer

By accepting the risk of fixed-cost financing, the firm is taking on the potential for larger returns to stockholders. This is because fixed-cost financing typically involves taking on debt at a fixed interest rate, which can result in higher profits if the firm's investments generate higher returns than the interest rate on the debt. The other options (A, B, and D) do not necessarily apply to accepting the risk of fixed-cost financing.

A Firm Accepts the Risk of Fixed-Cost Financing Is To