Financial Risk Is Additional Risk Borne by Shareholders as the Firm

question 119

True/False

Financial risk is additional risk borne by shareholders as the firm issues more debt.

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Definitions:

Real Opportunity Cost

The value of the best alternative forgone as a result of making a particular choice, expressed in terms of real goods and services.

Producing Product

The process of creating goods or services that are offered in the market for consumption or use.

Resources

Assets or inputs used to produce goods and services.

Economic Profit

The difference between a firm's total revenues and its total costs, including both explicit and implicit costs, indicating the financial gain in excess of opportunity costs.