If a firm takes on ________ it may be downgraded by rating agencies,resulting in ________ interest payments.
A)too much incremental debt; lower
B)too much incremental debt; higher
C)too little incremental debt; lower
D)too little incremental debt; higher

Question

Quizplus · Accepted Answer

If a firm takes on too much incremental debt, it may be downgraded by rating agencies due to increased risk. This will result in higher interest payments as the firm will have to pay a higher interest rate to compensate for the increased risk.

If a Firm Takes on ________ It May Be Downgraded