If a Firm Chose to Increase Its Debt Ratio from 20

question 50

Multiple Choice

If a firm chose to increase its debt ratio from 20% to 40%,what is the potential risk?

• A)The average cost of capital would most likely rise.
• B)The price of the firm's ordinary shares would definitely decline.
• C)If economic forces cause a reduction of sales,the firm's EPS might decline.
• D)The firm's WACC might decline.

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Definitions:

Cultural Differences

The variations in beliefs, behaviors, and norms observed among various groups, highly relevant in global interactions.

Stakeholders

Individuals or organizations that have an interest in or are affected by the outcome of a project.

Biological Reaction

A process by which living organisms respond to changes in their environment, involving biochemical pathways.

Work Environment

The setting, conditions, and culture in which an individual performs their job, including physical space and social aspects.