Which One of the Following Statements Concerning Financial Leverage Is

question 2

Multiple Choice

Which one of the following statements concerning financial leverage is correct in a world without taxes?

• A) Leverage is beneficial only when EBIT is relatively low.
• B) EPS is decreased when leverage is used and the expected level of EBIT is achieved.
• C) Financial leverage lowers the risk level of a firm.
• D) The amount of financial leverage employed has a major effect on the value of the firm.
• E) M&M Proposition I states that financial leverage is irrelevant to the value of a firm.

---

Definitions:

Scheduling

The process of arranging, controlling, and optimizing work and workloads in a production process or manufacturing operation to meet deadlines or objectives.

Service Sector

Businesses that provide services, rather than tangible goods.

Productivity Decrease

A reduction in the efficiency at which an organization or economy converts inputs into outputs, often leading to lower output per unit of input.

Capital Intensive

Refers to businesses or industries that require large amounts of money and resources to produce goods or services.