Which of the Following Statements Is Correct

question 38

Multiple Choice

Which of the following statements is correct?

• A) The effect of increasing a firm's use of financial leverage is to decrease the volatility of the firm's earnings.
• B) The effect of increasing a firm's use of financial leverage could be either to increase or decrease the volatility of the firm's earnings depending on how much leverage is utilized.
• C) The effect of increasing a firm's use of financial leverage is to increase the volatility of the firm's earnings.
• D) None of the statements are correct.

---

Definitions:

Knowledge-based View

is a perspective in strategic management that considers knowledge as the most strategically significant resource of a firm, focusing on the creation, integration, and management of intellectual capital.

Aristotle

An ancient Greek philosopher and scientist whose works were foundational to Western philosophy and science.

ACT Theory

A cognitive theory, short for Adaptive Control of Thought, which explains how the mind organizes knowledge and produces intelligent behavior.

Memory Stores

Components of the memory system responsible for retaining information over short-term, long-term, and intermediate durations.