As the Debt-Equity Ratio Decreases When Debt Is Not Risk

question 35

Multiple Choice

As the debt-equity ratio decreases when debt is not risk free:

• A) debtholders demand a higher expected return.
• B) debtholders demand a lower expected return.
• C) the expected return on equity increases.
• D)the expected return on assets increases.

---

Definitions:

Hiring And Training Cost

Expenses related to recruiting, hiring, and providing initial training for new employees, impacting an organization's investment in its workforce.

Regular Time Cost

The cost associated with employees' wages during their standard working hours, excluding overtime compensation.

Over Time Cost

The additional expenses incurred due to operations extending beyond the normal working hours, including but not limited to wages for overtime work.

Marginal Subcontracting Cost

The increased cost associated with subcontracting an extra unit of production or service.