The Less Fixed-Cost Debt, or Financial Leverage, a Firm Uses

question 50

True/False

The less fixed-cost debt, or financial leverage, a firm uses, the greater will be its risk and return.

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Definitions:

Net Income

What a company ultimately earns in profit after removing the costs of taxes and expenses from its revenue.

Stockholders' Equity

The ownership interest of shareholders in a corporation, measured as the company's total assets minus its total liabilities.

Dividends In Arrears

Outstanding dividends on cumulative preference shares that have not been paid by the company in the time stipulated.

Common Stock

A type of security that represents ownership in a corporation, giving holders voting rights and entitlement to dividends.