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Answer: High revenue, reduced operating leverage, and substantial fungible assets
The correct answer is **B** because a company's ability to support debt is strengthened by high revenue (indicating strong earnings potential), reduced operating leverage (lowering fixed cost burdens), and substantial fungible assets (providing liquidity and flexibility). - **Option A** is incorrect because while high revenue and low cash flow volatility are favorable, limited fungible assets reduce liquidity, which is detrimental to debt sustainability. - **Option C** is incorrect because although low cash flow volatility and reduced operating leverage are positive, limited fungible assets hinder the company's ability to meet debt obligations.
Author: LeetQuiz Editorial Team
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Which combination of factors most likely enhances a company's capacity to sustain debt in its capital structure?
A
High revenue, minimal cash flow volatility, and limited fungible assets
B
High revenue, reduced operating leverage, and substantial fungible assets
C
Minimal cash flow volatility, reduced operating leverage, and limited fungible assets
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