A factory which relies on highly technical machinery, may choose to reduce their overall leverage position by
A) selling their machinery
B) increasing their accounts receivable
C) utilizing a higher level of equity
D) decreasing their variable costs per unit

Question

Quizplus · Accepted Answer

By utilizing a higher level of equity, the factory can reduce its overall leverage position, as equity represents the owners' investment in the company, rather than borrowed funds. This can make the company less susceptible to financial risk and potential default on loans. Selling machinery or increasing accounts receivable may not necessarily reduce leverage, and decreasing variable costs per unit may not address the root issue of excessive leverage.

A Factory Which Relies on Highly Technical Machinery, May Choose