Adding Debt Decreases EBIT and Net Income Because of Increased

question 139

True/False

Adding debt decreases EBIT and Net Income because of increased interest charges. It also increases financial risk which tends to make risk averse investors sell their stock. Therefore, more leverage generally reduces ROE and EPS and always reduces stock price.

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Definitions:

Nucleus

The central and most important part of an object, movement, or group, forming the basis for its activity and growth; in cells, it is the organelle that houses the cell's DNA.

Aldosterone

A steroid hormone produced by the adrenal glands that helps regulate the balance of salt and water in the body.

Sodium

A chemical element with the symbol Na, essential for human health but requiring regulation in the body due to its role in fluid balance and blood pressure.

Blood Pressure

The force exerted by circulating blood upon the walls of blood vessels, often measured as an indicator of cardiovascular health.