If a Firm Believes That It Will Have Sufficient Cash

question 5

Multiple Choice

If a firm believes that it will have sufficient cash flows to cover interest payments, it may consider using ____ debt and ____ equity, which implies a ____ degree of financial leverage.

• A) more; less; lower
• B) more; less; higher
• C) less; more; higher
• D) none of the above

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Definitions:

Partner's Liability

The legal responsibility shared by partners in a partnership to cover the business's debts and obligations.

Avoid Obligations

Refers to actions or strategies individuals or entities use to legally evade fulfilling certain duties or responsibilities.

Liability Limitations

Provisions within a contract that seek to limit the amount of compensation one party can receive from another in the event of a breach or other liability.

Partnership Agreement

A contract between two or more business partners that outlines the responsibilities, profit and loss distribution, and rules and regulations of the partnership.