Which of the Following Statements on Financial Leverage Is True

question 46

Multiple Choice

Which of the following statements on financial leverage is true?

• A)Financial leverage has no effect on expected return to ordinary shareholders.
• B)Expected return to ordinary shareholders increases because return on borrowings is expected to exceed the cost of borrowings.
• C)Expected return to ordinary shareholders increases because the return on assets increases.
• D)Financial leverage may have a positive or negative effect on return to ordinary shareholders.

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Definitions:

Highest-Energy Structure

The conformation or arrangement of atoms in a molecule that has the highest potential energy, often least stable, compared to other conformations.

Molecular Collision

The process in which two or more particles (atoms, ions, molecules) come into close enough proximity to affect each other's trajectories or engage in a chemical reaction.

Activation Energy

The minimum amount of energy required to initiate a chemical reaction or the energy barrier to the reaction's progress.

Reaction-Energy Diagram

A graphical representation showing the energy of a system as reactants transform into products during a chemical reaction, usually highlighting energy barriers and stable intermediates.