Financial risk is most associated with:
A)the use of equity financing by corporations
B)the use of debt financing by corporations
C)equity investments held by corporations
D)debt investments held by corporations

Question

Quizplus · Accepted Answer

Financial risk refers to the risk that a company will be unable to meet its financial obligations. The use of debt financing by corporations increases their financial risk because they have to make regular interest payments and eventually repay the principal amount borrowed. In contrast, equity financing does not create financial risk as the company is not required to make regular dividend payments and does not have to repay the investment.

Financial Risk Is Most Associated With