Which of These Describes the Principle Based on the Optimal

question 36

Multiple Choice

Which of these describes the principle based on the optimal leverage approach of financial leverage?

• A)There is an ideal financial leverage position for each firm
• B)As financial leverage steadily increases,the value of firms falls in response
• C)When financial leverage increases,share price concurrently increases
• D)The ERC is positively related to profit persistence factor

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Definitions:

Stacked Column Chart

A graphical representation of data where multiple columns are placed on top of one another to indicate total values and the constituent parts.

Coefficient Of Determination

Represented as R-squared, it measures the proportion of the variance in the dependent variable that is predictable from the independent variable(s).

Sample Correlation

A measure that indicates the degree to which two variables change together, based on data drawn from a sample of the population.

Test Statistic

A value calculated from sample data during a statistical hypothesis test to determine the p-value or to compare against a critical value.