Which Statement Is Correct About the Financial Leverage of a Company

question 10

Multiple Choice

Which statement is correct about the financial leverage of a company with an equity base of $400,000?

• A)A company that borrows $150,000 is more leveraged than a company that borrows $250,000.
• B)A company that borrows $250,000 is more leveraged than a company that borrows $150,000.
• C)The return on equity of the company is unaffected by the financial leverage.
• D)The return on equity of the company will be higher if it has a lower leverage.