The Increase in Risk to Equityholders When Financial Leverage Is

question 16

Multiple Choice

The increase in risk to equityholders when financial leverage is introduced is evidenced by:

• A) higher EPS as EBIT increases.
• B) a higher variability of EPS with debt than all equity.
• C) increased use of homemade leverage.
• D) equivalence value between levered and unlevered firms in the presence of taxes.
• E) None of these.

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Definitions:

Hemiazygos

A vein on the left side of the vertebral column that drains blood from the posterior walls of the thorax and abdomen into the azygos vein.

Posterior Thoracic

Pertaining to the back part of the chest area, which houses important components such as the lungs and heart.

Circulatory System

The body's system of blood vessels and organs that transports blood to and from the heart and transports nutrients, oxygen, carbon dioxide, and hormones throughout the body.

Excretes Waste

The process by which living organisms remove or expel waste materials from their bodies.