A factory that relies on highly technical machinery may choose to reduce its overall leverage position by
A) selling its machinery.
B) increasing its 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 does not need to be repaid like debt does. Selling its machinery or increasing accounts receivable would not necessarily reduce leverage, and decreasing variable costs per unit may not have a significant impact on leverage.

A Factory That Relies on Highly Technical Machinery May Choose