Under Which of the Following Conditions Could the Overuse of Financial

question 96

Multiple Choice

Under which of the following conditions could the overuse of financial leverage be detrimental to the firm?

• A) stable industry
• B) cyclical demand for the firm's products
• C) upswing of business cycle
• D) low interest cost compared to return on assets

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Definitions:

Satisfaction

The feeling of pleasure or contentment arising from the fulfillment of one's desires, expectations, or needs.

Mechanistic Designs

Mechanistic designs are centralised with many rules and procedures, a clear-cut division of labour, narrow spans of control and formal coordination.

Organic Designs

Approaches to structuring organizations that foster decentralization, allowing for quick adaptation and autonomy among teams.

Centralised Authority

An organizational structure where decision-making powers are concentrated at the top levels of management, leading to a more uniform and controlled implementation of policies.