Which of the following is NOT a result of increasing debt?
A)A decrease in the financial flexibility of the firm
B)An increase in the sales breakeven point.
C)An increase in managers' flexibility to spend money.
D)An increase in the cost of borrowing.

Question

Quizplus · Accepted Answer

Increasing debt does not necessarily increase managers' flexibility to spend money. In fact, it can have the opposite effect by limiting the funds available for future investments and operations, and potentially leading to financial distress and bankruptcy. The other options are all possible results of increasing debt: A) Debt can decrease the financial flexibility of the firm by tying up cash flows in debt service payments and limiting access to additional financing. B) Debt can increase the sales breakeven point by adding fixed interest payments to fixed costs and raising the minimum level of sales needed to cover expenses. D) Debt can increase the cost of borrowing by raising the risk and perceived creditworthiness of the borrower, leading to higher interest rates and fees.

Which of the Following Is NOT a Result of Increasing