Home › CUET UG › Business Studies › Financial Management › Increasing the use of debt in the capital struct…
Increasing the use of debt in the capital structure raises:
Abusiness risk, regardless of financing
Bthe firm's tax-free income
Cthe firm's sales automatically
Dfinancial risk, since fixed interest must be paid regardless of profit
Answer & Solution
Correct answer: D. financial risk, since fixed interest must be paid regardless of profit
More debt means more fixed interest obligations payable regardless of profit, raising financial risk.
Related questions
Excess cash invested in cash alternatives is said to create:Because payments for purchases are usually made on credit, cash outflows in a month often Assets that turn into cash within a year through normal operations are contrasted with capCash held by a business is needed above all to pay the bills and meet the:Credit taken from suppliers, recorded as accounts payable, is called:Better inventory management, better collections and longer supplier terms together will:Working capital needs that stay in place all year round are described as:Working capital needs that rise and fall with the season are described as: