What Is the Primary Effect of Financial Gearing

question 12

Multiple Choice

What is the primary effect of financial gearing?

• A) To ensure that shareholders' returns exceed the firm's income
• B) To ensure that the firm's income closely reflects the shareholders' returns
• C) To reduce the degree of variation in a firm's income for shareholders' returns
• D) To magnify the impact of variation in a firm's income on shareholders' returns