A company with a capital structure that shifts more toward debt financing will appear to be in a stronger position to pay interest and any principal amount that may be maturing by using its cash flows generated by operating activities.

Question

Quizplus · Accepted Answer

Shifting more toward debt financing increases a company's financial leverage, which can increase the risk of default on interest and principal payments if cash flows from operating activities are not sufficient to cover these obligations.

A Company with a Capital Structure That Shifts More Toward