Question
A firm with more ______ in its capital structure is _______ risky than an otherwise identical firm.
debt; less
debt; more
equity; more
cannot tell
debt; less
debt; more
equity; more
cannot tell
Answers
GPT-4o mini
A firm with more **debt** in its capital structure is **more** risky than an otherwise identical firm.
This is because debt increases the financial obligations of a firm, leading to higher fixed costs due to interest payments and potentially increasing the risk of default, especially during downturns in business performance.
This is because debt increases the financial obligations of a firm, leading to higher fixed costs due to interest payments and potentially increasing the risk of default, especially during downturns in business performance.