The Higher the Degree of Financial Leverage Employed by a Firm,the

question 44

Multiple Choice

The higher the degree of financial leverage employed by a firm,the:

• A)higher the probability that the firm will encounter financial distress.
• B)lower the amount of debt incurred.
• C)less debt a firm has per dollar of total assets.
• D)higher the number of outstanding shares of stock.
• E)lower the balance in accounts payable.

---

Definitions:

Diversified Portfolio

An investment portfolio that includes a variety of asset types in order to reduce risk.

ETFs

Exchange-Traded Funds, which are investment funds traded on stock exchanges, similar to stocks, and hold assets such as stocks, commodities, or bonds.

Capital Gain Distributions

Payments to shareholders or fund investors from the sale of securities within the portfolio that have appreciated in value.