Other Things Held Constant, an Increase in Financial Leverage Will

question 25

True/False

Other things held constant, an increase in financial leverage will increase a firm's market (or systematic) risk as measured by its beta coefficient.

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Definitions:

Capital Expenditures

Funds used by a company to acquire or upgrade physical assets such as property, industrial buildings or equipment to improve its long-term operations and growth.

Cash Dividends

A portion of a company's earnings distributed to shareholders in the form of cash.

Direct Method

A way of preparing the cash flow statement where actual cash flow information from the company’s operations is directly reported.

Accounts Receivable

The amount of money owed to a company by its customers for goods or services that have been delivered or used but not yet paid for.