Which of the following would increase the likelihood that a company would increase its debt ratio,other things held constant?
A)an increase in costs incurred when filing for bankruptcy
B)an increase in the corporate tax rate
C)an increase in the personal tax rate
D)the company's stock price hitting a new low

Question

Quizplus · Accepted Answer

An increase in the corporate tax rate would make debt financing more attractive because interest payments on debt are tax-deductible, effectively reducing the company's taxable income and thus its tax liability. This tax shield makes increasing the debt ratio more appealing.

Which of the Following Would Increase the Likelihood That a Company