Debt Financing Affects Neither the Operating Risk nor the Business

question 108

True/False

Debt financing affects neither the operating risk nor the business risk of the firm.

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Definitions:

Straight-Line Method

A method of calculating depreciation of an asset by evenly spreading its cost over the expected useful life of the asset.

Depreciation Expense

The portion of the cost of a fixed asset that is considered an expense due to its wear and tear over a specific period.

Useful Life

The estimated period over which a fixed asset is expected to be usable by the entity, affecting its depreciation calculation.

Straight-Line Method

An accounting method of depreciating fixed assets evenly over their useful lives.