Question

A less-established company, or a company with a high debt to equity ratio, would be considered a riskier investment to the lender. Which of the following principles attests to this axiom?

(A) Direct relationship principle
(B) Compensating balance concept
(C) Risk/return trade-off
(D) Cost-benefit analysis

Answer 1

Answer:

(C) Risk/return trade-off

Explanation:

According to my research on company risk assessments, I can say that based on the information provided within the question the principle that attests to this axiom is Risk/Return trade-off. This is basically a trade off based on the more return sought, the more risk that must be undertaken

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