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:

Standards Gap

The difference between the quality standards set by a company for its products or services and the actual performance perceived by customers.

Communications Gap

A situation where there is a difference or conflict between the message sent and the message received, often leading to misunderstanding.

Knowledge Gap

The difference between what is known and what needs to be known to effectively understand or perform an activity.

Pricing Strategies

Various approaches businesses use to set prices for their products or services to maximize profitability and meet market demand.