What are some possible consequences of financial distress?

1. Bondholders, who face the prospect of getting only part of their money back, are likely to want the company to take additional risks.

2. Equity investors would like the company to cut its dividend payments to conserve cash

3. Equity investors would like the firm to shift towards riskier lines of business

a. 1 and 2 only

b. 3 only

c. 2 only

d. 1 only