Leverage Adds Variability to Financial Performance When Operating Results Changes

question 66

Multiple Choice

Leverage adds variability to financial performance when operating results changes which means performance is __________________ with more leverage. ​ ​

• A)unchanged​
• B)riskier​
• C)less risky​

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Definitions:

Return on Assets

A profitability ratio that measures how efficiently a company uses its assets to generate profit, calculated by dividing net income by total assets.

Debt to Total Assets

A financial ratio that shows the proportion of a company's assets that are financed through debt.

Basic Earnings per Share

A measure of a company's profitability, calculated by dividing net income by the number of outstanding common shares.

Industry Averages

Statistical measures that represent the typical value or norm within a particular industry, used for benchmarking and comparative analysis.