The Reason That Financial Leverage Increases Shareholder Risk Is That

question 79

Multiple Choice

The reason that financial leverage increases shareholder risk is that there is:

• A) more debt which increases the operating risk.
• B) less equity to absorb the operating risk.
• C) less business risk to be spread around.
• D) more financial risk due to reduced business risk.

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Definitions:

Bushels of Grain

A unit of volume measurement used in the United States for agricultural commodities, like wheat and corn, with specific equivalents in pounds varying by commodity.

Acres of Pasture

A measure of land area, specifically used for grazing livestock or as grassland.

Budget

A financial plan detailing projected revenue and expenditures over a specific period.

Bushels of Grain

A measurement unit for volume typically used in the U.S. to quantify agricultural produce like grain.