Which of the Following Is a Reason Why High Debt

question 2

Multiple Choice

Which of the following is a reason why high debt ratios might cause firms to lose market share?

• A)Firms with high debt to equity ratio have lower costs of financial distress and hence cannot take advantage of forcing employees to make wage concessions.
• B)Firms with high debt to equity ratio have to pay a major part of their revenue as interest expense reducing the dividend payout ratios.
• C)Because of concerns about its long-term viability and the quality of its products,a highly levered firm may find it difficult to retain and attract customers.
• D)Rivals may view a highly levered firm as a major formidable competitor,and try to improve their product's quality to steal customers.

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Definitions:

Test Statistic

A value calculated from sample data used to determine whether to reject the null hypothesis in a statistical hypothesis test.

P-Value

The potential of observing test results that are at least as extreme as the actual ones, under the belief that the null hypothesis is accurate.

Test Statistic

A calculated value used in statistical hypothesis testing that helps decide whether to reject the null hypothesis.

P-Value

A statistical measure that helps determine the significance of results, indicating how likely it is that findings could have occurred under the null hypothesis.