If a company increases the amount of debt it has, all other things being equal, the risk to the shareholders increases.

Name: If a company increases the amount of debt it has, all other things being equal, the risk to the shareholders increases.
Brand: Quizplus
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Question

Quizplus · Accepted Answer

When a company increases its debt, it increases the amount of financial leverage it uses, which can magnify the gains and losses for shareholders. Therefore, the risk to the shareholders increases when a company takes on more debt.

If a Company Increases the Amount of Debt It Has