If a firm believes that it will have sufficient cash flows to cover interest payments, it may consider using ____ debt and ____ equity, which implies a ____ degree of financial leverage.

Question

Quizplus · Accepted Answer

Using more debt and less equity implies a higher degree of financial leverage, as the firm is relying more on borrowed funds, which increases the potential return on equity but also increases risk.

If a Firm Believes That It Will Have Sufficient Cash