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

question 7

True/False

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

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Definitions:

Ozone

A molecule made of three oxygen atoms, O3, forming a layer in the Earth's stratosphere that protects life by absorbing most of the sun's harmful ultraviolet radiation.

Resonance Structures

Representations of a molecule showing different configurations of electron pairs, to depict delocalization of electrons within the molecule.

Nitrite Ion

A polyatomic ion with the molecular formula NO2-, derived from nitrous acid.

Methane

A colorless, odorless flammable gas that is the simplest alkane, used as a fuel and in chemical synthesis, with the chemical formula CH4.