The Impact of Increasing Financial Leverage, All Else Remaining Equal

question 21

Multiple Choice

The impact of increasing financial leverage, all else remaining equal, is to cause

• A) A reduction in the return on equity
• B) Increases the level of risk in the company
• C) Increases the return on capital employed
• D) A commensurate increase in operating leverage
• E) An improvement in liquidity

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Definitions:

Unclear and Ambiguous

Descriptions or statements that lack clarity and can be interpreted in multiple ways.

Strong Needs for Affiliation

A personality characteristic where individuals prioritize being liked and belonging to a group.

External Locus of Control

A belief system where an individual perceives outcomes in their life as being driven by external forces or luck rather than their own actions.

Supportive Leadership

A leadership style focused on providing emotional support, encouragement, and fostering a positive work environment for team members.