Which of the following is most likely to cause a firm to use more financial leverage?
A)the current owners concern for maintaining control of a healthy firm
B)concern for the firm's Moodys and S & P bond ratings
C)concern for maintaining excess borrowing capacity
D)management's concern for their own risk

Question

Quizplus · Accepted Answer

The use of more financial leverage means a firm is using more debt relative to equity. When current owners are concerned about maintaining control of a healthy firm, they may prefer to use debt financing rather than issuing new equity, which could dilute their ownership percentage. The other options typically lead to a preference for less financial leverage due to concerns about credit ratings, maintaining borrowing capacity, or personal risk aversion from management.

Which of the Following Is Most Likely to Cause a Firm