Which Statement Is TRUE Regarding a Firm That Increases Financial

question 70

Multiple Choice

Which statement is TRUE regarding a firm that increases financial leverage?

• A) Average earnings per share increases,while shareholder risk increases.
• B) Average earnings per share increases,while shareholder risk decreases.
• C) Average earnings per share decreases,while shareholder risk decreases.
• D) Average earnings per share decreases,while shareholder risk increases.

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Definitions:

Probability of Failure

This refers to the likelihood that a system or component will fail to perform its intended function within a specified period.

Doomsday Machine

A hypothetical construct, often used in discussions of nuclear strategy, that can automatically trigger an annihilating response if a nation is attacked.

Preemptive Nuclear Attack

A nuclear strike launched with the belief that an enemy is about to carry out a nuclear attack.

Credible Threat

A concept in game theory where a threat or strategy is believable and likely to be carried out by a player.