Why Are Leverage Ratios Important in Overall Financial Analysis of a Firm

question 59

Multiple Choice

Why are leverage ratios important in overall financial analysis of a firm?

• A)Low ROA can generate high ROE if the company is highly levered.
• B)Use of leverage magnifies losses which increases risk.
• C)Leverage ratios measure a firm's ROA.
• D)High ROE can only be generated with high leverage.

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