Use of Leverage Always Increases the Amount of Risk

question 6

True/False

Use of leverage always increases the amount of risk.

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Definitions:

Stock Price Appreciation

The rise in the value of a company's shares over time, reflecting the market's increased valuation of the company.

Common Stock

A form of corporate equity ownership, a type of security representing ownership of a fraction of a company, providing voting rights and a share in the company’s profits.

Return on Investment

A performance measure used to evaluate the efficiency or profitability of an investment or compare the efficiency of a number of different investments.

Treasury Stock

Refers to shares that were issued and later reacquired by the company. It is subtracted from total equity.