Question
Which of the following statments is incorrect? Question 12 options: Because creditors can foresee, to at least some extent, the costs of bankruptcy, they charge
Which of the following statments is incorrect?
Question 12 options:
Because creditors can foresee, to at least some extent, the costs of bankruptcy, they charge a higher rate of interest to compensate for the present value of bankruptcy costs. | |
The firm's business risk is largely determined by the financial characteristics of its industry. | |
Financial risk refers to the extra risk stockholders bear as a result of the use of debt as compared with the risk they would bear if no debt were used. | |
Whenever a firm goes into debt, it is using financial leverage. | |
The trade-off theory tells us that the capital structure decision involves a tradeoff between the costs of debt financing and the benefits of debt financing. |
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