The Reason That Financial Leverage Increases Shareholder Risk Is That

question 79

Multiple Choice

The reason that financial leverage increases shareholder risk is that there is:

• A) more debt which increases the operating risk.
• B) less equity to absorb the operating risk.
• C) less business risk to be spread around.
• D) more financial risk due to reduced business risk.

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Definitions:

Retroactive Interference

A phenomenon where newly acquired information interferes with the retrieval of older information.

Proactive Interference

A phenomenon where older memories interfere with the recall of newer memories, often affecting the learning process.

Cue-dependent Forgetting

A phenomenon where information is not remembered unless the context present at encoding is also present at recall.

Decay

The gradual decline in the ability to retrieve and maintain information over time, often used to describe the fading of memory.