question_answer

Silver Tech Limited is a start-up company engaged in developing nano-technology for mobiles. The debt component is quite high in the capital structure of the company. Identify the risk which the company can face in future.

Answer:

The company can face financial risk. It refers to a position, when a company is not able to meet its fixed financial charges namely interest, preference dividend, payment and repayment obligations. It arises due to higher use of debt.