What Are Some of the Possible Consequences of Financial Distress

question 46

Multiple Choice

What are some of the possible consequences of financial distress?
I. Bondholders, who face the prospect of getting only part of their money back, are likely to want the company to take additional risks.
II. Equity investors would like the company to cut its dividend payments to conserve cash.
III. Equity investors would like the firm to shift toward riskier lines of business.

• A) I only
• B) II only
• C) III only
• D) I and II only

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Definitions:

Guidance

The act of offering direction, advice, or recommendations on how to proceed in a situation.

Abandoned Line

A term referring to discontinued or no longer used railway tracks.

Purpose And Context

The intended aim or objective of something and the circumstances or environment relevant to its understanding.

Analyzing Arguments

The process of breaking down logical statements into their component parts to assess their validity and soundness.