A Corporation Has Concluded That Its Financial Risk Premium Is

question 39

Multiple Choice

A corporation has concluded that its financial risk premium is too high. In order to decrease this, the firm can

• A) increase the proportion of common stock equity to decrease financial risk.
• B) increase the proportion of long-term debt to decrease the cost of capital.
• C) decrease the proportion of common stock equity to decrease financial risk.
• D) increase short-term debt to decrease the cost of capital.

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Definitions:

Financial Performance

Measures how well a firm is using its assets to generate profits and cash flow, reflecting the financial health of the company.

Corporate Social Responsibility

The practice of companies taking responsibility for the impact of their activities on society, the environment, and their stakeholders.

Volunteer Work

Activities or services performed willingly and without pay by individuals to benefit others or a cause.

Personal Growth

The process of improving oneself mentally, emotionally, intellectually, or physically, leading to self-improvement and enhancement of quality of life.