The Graphical Probability Distribution of ROE for a Firm That

question 36

True/False

The graphical probability distribution of ROE for a firm that uses financial leverage would tend to be more peaked than the distribution if the firm used no leverage, other things held constant.

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Definitions:

Liability

refers to any type of financial commitment or obligation that an entity is responsible for, such as debts and legal responsibilities.

Employer Identification Number

A unique nine-digit number assigned by the IRS for identification of businesses in the United States for tax purposes.

Monthly Depositor

A business classified as a monthly depositor will make its payroll tax deposits only once each month for the amount of Form 941 taxes due from the prior month.

Look-Back Period

A specified time frame in the past during which relevant financial transactions or performance is reviewed or analyzed.