Which one of the following statements is true?
A)A firm with low anticipated profits will likely take on a high level of debt.
B)A successful firm will probably be all-equity financed.
C)Rational firms raise debt levels when profits are expected to decline.
D)Rational investors are likely to infer a firm is more valuable when its debt level declines.
E)Investors will generally view an increase in debt as a positive sign for the firm's future value.

Question

Quizplus · Accepted Answer

An increase in debt is often seen as a positive signal because it suggests that the firm is confident in its future cash flows and ability to service the debt, indicating potential growth and profitability.

Which One of the Following Statements Is True