Which of the Following Statements Is True

question 7

Multiple Choice

Which of the following statements is true?

• A)Bankruptcy costs do not concern shareholders because they are borne entirely by other parties.
• B)Debtholders rarely realise the potential for bankruptcy and do not demand a higher rate of interest on their loans in compensation.
• C)Debtholders will not demand higher interest rates on loans because in so doing they may increase the likelihood of bankruptcy.
• D)For any given level of business risk,the higher the financial risk,the greater the probability of bankruptcy.

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