Financial Leverage Has the Following Effect on Financial Performance

question 62

Multiple Choice

Financial leverage has the following effect on financial performance:

• A)during periods of reasonably good performance, leverage enhances results in terms of ROE and EPS.
• B)leverage adds variability to financial performance making the firm's stock a riskier investment.
• C)leverage always makes performance better and thereby increases stock price.
• D)Both a and b

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Definitions:

Organizational Survival

The ability of a company or institution to continue to exist and operate over time, overcoming challenges and adapting to changes.

Turbulent Environment

A dynamic and unpredictable external business environment characterized by rapid changes and uncertainties.

General Environment

The broad external conditions (economic, technological, sociocultural, and political/legal) that affect organizations and their functioning.

Specific Environment

The external factors and influences that are directly relevant and impactful to an organization's operations, including competitors, customers, and suppliers.