Other things remaining the same, infusion of fresh

Solution

• Equity infusion increases the net worth of the company. • This enhances the company’s capital adequacy and reduces the debt-to-equity ratio. • A stronger capital structure means the company has greater capacity to absorb shocks, repay obligations, and take on new credit if needed. • As a result, credit rating agencies and lenders view equity infusion as a positive development for the company’s credit profile. Thus, infusion of fresh equity generally improves a company’s credit profile.