Debt usage will have an effect on:
A) business risk.
B) financial risk.
C) operating risk.
D) asset risk.

Question

Quizplus · Accepted Answer

Debt usage will have a direct impact on financial risk. This is because debt represents the amount of money that the company owes to creditors, and the company is obligated to pay back the debts with interest. A higher amount of debt can increase the financial risk of the company as it may have difficulty making timely repayments, which can result in default on the loan or bankruptcy. Therefore, companies should be cautious when acquiring debt and try to maintain an optimal debt-to-equity ratio.

Debt Usage Will Have an Effect On