Which of the following is a reason why high debt ratios might cause firms to lose market share?
A) Firms with high debt to equity ratio have lower costs of financial distress and hence cannot take advantage of forcing employees to make wage concessions.
B) Firms with high debt to equity ratio have to pay a major part of their revenue as interest expense reducing the dividend payout ratios.
C) Because of concerns about its long-term viability and the quality of its products,a highly levered firm may find it difficult to retain and attract customers.
D) Rivals may view a highly levered firm as a major formidable competitor,and try to improve their product's quality to steal customers.
Correct Answer:
Verified
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