Which of the Following Statements About Financial Risk Is Incorrect

question 47

Multiple Choice

Which of the following statements about financial risk is incorrect?

• A) The higher the debt-to-equity ratio, the higher the degree of financial risk.
• B) Interest payments on debt must be paid when they fall due.
• C) When a business fails equity holders rank ahead of providers of debt due to their higher financial risk.
• D) The higher the proportion of debt the higher the potential return on shareholders' funds.

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Definitions:

Characteristics

Qualities or features that are typical of a person, thing, or group and serve to identify them.

Delegation

The assignment of responsibility or authority from one person to another for specific tasks or functions.

Organic Company

A business that is flexible, adaptive, and informal in its structure and operations, often contrasted with more bureaucratic, traditional firms.

Barriers

Obstacles that impede progress or achievement.