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a. high debt-to-equity ratios.
b. zero coupon bonds in their capital structures.
c. low current ratios.
d. high fixed-charge coverage.
The relationship between total liabilities & total equity is called the debt to equity ratio.Itshows the proportion of total liabilities relative to the proportion of totalequity that is financing the company’s assets. Thus, this ratio measures financialleverage.
If the debt to equity ratio is greater than1, then the company is financingmore assets with debt than with equity.
If the ratio is less than1, then the companyis financing more assets with equity than with debt.
The higher the debt to equityratio, the higher the company’s financial risk
So, Choice A, "high debt to equity ratio" is the right answer
Correct answer a. Financial leverage is defined as the use of financing with a fixed charge such as interest. Firms with a high degree of financial leverage make significant use of debt and, therefore, have high debt-to-equity ratios.
answer a) high debt to equity ratio
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Answer : A
high debt-to-equity ratios.
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thanks for all
ANSWER IS OPTION A - HIGH DEBT TO EQUITY RATIO
A.
Having the high degree of Debt and Equity because financial leverage is calculated by %change in EBIT/ % change in EBT. A firm with high degree of FL is considered very risky.
high fixed-charge coverage.............
a. high debt-to-equity ratios.
d answer >>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
a) high debt - to - equity ratios
When a company has a high degree of financial leverage, the volatility of its stock price will likely increase the volatility of its earnings. When a company has a high level of stock price volatility, it must record a higher expense associated with any stock options it has granted. This constitutes an additional cost of taking on more debt.
