The more long-term debt in a firm's capital structure, the less the risk that the firm will experience difficulty making the required payments when due.

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The more long-term debt a firm has, the higher the risk that the firm will have difficulty making the required payments when due. This is because long-term debt usually involves higher interest rates and fixed payment schedules that must be met regardless of the firm's financial performance. As a result, too much long-term debt can lead to financial distress and even bankruptcy if the firm is unable to meet its debt obligations.

The More Long-Term Debt in a Firm's Capital Structure, the Less