Which Statement Is Correct About the Financial Leverage of a Company

question 10

Multiple Choice

Which statement is correct about the financial leverage of a company with an equity base of $400,000?

• A)A company that borrows $150,000 is more leveraged than a company that borrows $250,000.
• B)A company that borrows $250,000 is more leveraged than a company that borrows $150,000.
• C)The return on equity of the company is unaffected by the financial leverage.
• D)The return on equity of the company will be higher if it has a lower leverage.

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Definitions:

Network Organizations

are structured around networks rather than traditional hierarchies, emphasizing informal communication, flexibility, and decentralized decision-making.

Virtual Organizations

A business model where an organization operates and coordinates its activities primarily through digital and telecommunication networks rather than in a physical space.

Functional Conflict

A productive form of conflict that aims to improve group performance by encouraging different opinions and critical thinking.

Decision Making

The process of choosing among alternative courses of action.