The Effect of Financial Leverage on ROE Depends On

question 58

Multiple Choice

The effect of financial leverage on ROE depends on:

• A)the firm's financing strategy.
• B)the dividend amount paid out.
• C)the market value of the debt.
• D)none of the above.

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Definitions:

Closing Process

The final steps in the accounting cycle used to update the financial records for the period's revenues, expenses, and dividends to prepare for the next accounting period.

Income Statement

A financial statement that shows a company's revenue and expenses over a specific period, illustrating the company's profit or loss.

Income Summary Account

A temporary account used in closing process to transfer the balances of all revenue and expense accounts to Retained Earnings.

Income Summary

An account used in the closing process during the accounting cycle that summarizes revenues and expenses before transferring the net amount to retained earnings.