The desire to maintain high bond ratings will tend to increase the use of debt financing in a firm's capital structure.

Question

Quizplus · Accepted Answer

The desire to maintain high bond ratings typically leads to a more conservative approach to debt financing, as excessive debt can lead to a downgrade in bond ratings. Companies may limit their use of debt to ensure they keep a high rating, which indicates lower risk to investors.

The Desire to Maintain High Bond Ratings Will Tend to Increase