The Reason That Financial Leverage Increases Shareholder Risk Is That

question 79

Multiple Choice

The reason that financial leverage increases shareholder risk is that there is:

• A) more debt which increases the operating risk.
• B) less equity to absorb the operating risk.
• C) less business risk to be spread around.
• D) more financial risk due to reduced business risk.

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Definitions:

Assignor

The party in a contract or agreement who transfers their rights or interests to another party, known as the assignee.

Assignee

An individual or entity to whom rights or interests are transferred by another.

Antiassignment Clause

A provision in a contract that prohibits the transfer of rights or delegation of duties to another party without the original party's approval.

Oral Assignments

Assignments or transfers of rights or property carried out verbally rather than in writing, although their enforceability may be limited.