An Increase in the Financial Leverage of a Firm as a Result

question 374

Multiple Choice

An increase in the financial leverage of a firm as a result of an increase in outstanding debt __________ the potential reward to stockholders while ___________ the risk of financial distress or bankruptcy.

• A) Decreases; decreasing
• B) Increases; decreasing
• C) Increases; increasing
• D) Decreases; increasing
• E) Does not affect; increasing

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Definitions:

Lactase

An enzyme that catalyzes the hydrolysis of lactose into glucose and galactose.

Monosaccharides

Simple sugars that constitute the building blocks of more complex carbohydrates.

Hydrolysis

A chemical reaction in which water is used to break down the bonds of a particular substance, such as in the digestion of nutrients.

Macromolecules

Large molecules essential for life, including proteins, nucleic acids, carbohydrates, and lipids, which perform a variety of vital functions in cells.