Which of the Following Is a Valid Reason for a Firm

question 26

Multiple Choice

Which of the following is a valid reason for a firm not to use as much debt as it can raise?

• A)The use of more debt is expected to result in a lower price/earnings ratio.
• B)The use of more debt is expected to result in an increase in the firm's cost of capital when everything is considered.
• C)More debt will increase the firm's riskiness.
• D)All of the above are valid reasons for a firm to use less debt than might be available.

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Definitions:

International Organization for Standardization

An independent, non-governmental international organization that develops standards to ensure quality, safety, and efficiency of products, services, and systems.

ISO

International Organization for Standardization, an international standard-setting body composed of representatives from various national standards organizations.

Stud

A type of fastener or fixed projection that is often threaded and used to secure objects or as a mounting point.

Thread Callout

An annotation on a drawing specifying the characteristics of a threaded part, such as diameter, pitch, and thread type.