Question

higher debt equity ratio results in a)lower financial risk b) high degree of operating risk c) low financial crisis d)higher eps

Answer 1

Answer:

Explanation:

(c) Higher debt- equity ratio refers to a situation where the proportion of debt in total capital is higher. This implies higher degree of financial risk. This is because in case of debt, it is obligatory for a business to make interest payments and the return of principal to the debtors. Thus, higher debt increases the financial risk for the business.