Which of the Following Is NOT Accurate Regarding fiNancial Leverage

question 126

Multiple Choice

Which of the following is NOT accurate regarding financial leverage?

• A) Whenever a firm's debt increases faster than its equity, financial leverage increases.
• B) Leverage is most beneficial when EBIT is relatively high.
• C) Investors can undo the effects of the firm's capital structure by using homemade leverage.
• D) Increasing financial leverage will always increase the EPS for stockholders.
• E) The level of financial leverage that produces the highest firm value is the one most beneficial to stockholders.

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