When EBIT Is Positive, High Leverage Decreases the Returns to Shareholders

question 369

True/False

When EBIT is positive, high leverage decreases the returns to shareholders (as measured by ROE).

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Definitions:

Production Possibilities

Different combinations of goods and services that an economy can produce using all its resources efficiently.

Mutually Beneficial

Actions or agreements that provide benefits to all parties involved.

Specialize

To focus on a specific area of study, work, or activity, developing expertise and efficiency in that particular area.

Labor-Intensive

Describes industries or processes that require a large amount of labor to produce goods or services, as opposed to using a large amount of capital or machinery.