If the Firm Decreases Its Debt Ratio,both the Debt and the Equity

question 104

True/False

If the firm decreases its debt ratio,both the debt and the equity will become riskier.The debtholders and equity holders require a higher return to compensate for the increased risk.

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Definitions:

Receipt Stipulation

An agreement or acknowledgment documenting the receipt of something, often used in legal contexts to prove the acceptance of documents or payments.

Mailbox Rule

A legal principle stating that an offer is considered accepted at the time the acceptance is sent through the mail, not when it is received by the offeror.

UCC

This Code, known as the Uniform Commercial Code, encompasses a broad range of regulations pertinent to all commercial transactions across the United States.

Battle of the Forms

A legal concept relating to the negotiation process between businesses over the terms of a contract, particularly when both parties provide conflicting standard terms.