Higher debt-equity ratio results in (a) lower financial risk (b) higher degree of operating risk (c) higher degree of financial risk (d) higher EPS
Answers
Answer :
Higher debt-equity ratio results in : higher degree of financial risk
Among the given options option (c) higher degree of financial risk is the correct answer.
Explanation :
Financial risk is the chance that a firm would fail to meet its payment obligations. It arises with higher use of debt.
Capital structure represents the proportion of debt capital and equity capital to make up the total capital of the firm.
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