Question

Using debt and preferred stock in the capital structure of a firm will _____. select one:

a. increase financial risk
b. decrease business risk
c. increase the tax payable by the firm.
d. decrease operating leverage
e. increase the book value of common stoc

Answer 1

It will increase the financial risk of a company. This can make it so that a company goes further in debt, and can impact the profit that a company makes as it can increase the debt so much that the profit cannot overcome the debt.