Economics · Capital Structure Planning

Consider the following statements regarding the relationship between growth, stability, and financial flexibility in capital structure planning: Statement 1: High-growth firms often prioritize the maintenance of reserve borrowing capacity to ensure they have the strategic flexibility required to exploit unexpected expansion or acquisition opportunities. Statement 2: Mature firms with highly predictable cash flows are generally better suited for higher debt levels, whereas cyclical firms tend to maintain lower leverage to manage the risks associated with fluctuating earnings.