As the Financial Leverage Multiplier Increases, This May Result in ________

question 6

Multiple Choice

As the financial leverage multiplier increases, this may result in ________.

• A) an increase in the net profit margin and return on investment, due to the decrease in interest expense as debt decreases
• B) an increase in the net profit margin and return on investment, due to the increase in interest expense as debt increases
• C) a decrease in the net profit margin and return on investment, due to the increase in interest expense as debt increases
• D) a decrease in the net profit margin and return on investment, due to the decrease in interest expense as debt decreases

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Definitions:

Fourth Quintile

The fourth quintile refers to the subgroup that falls into the 60-80% range of a distribution when data is divided into five equal groups, often used in economic and social statistics to analyze income or wealth distribution.

Total Income

The total amount of money received by an individual or generated by an entity within a specific period, including wages, salaries, benefits, and other earnings.

Highest Percent

The maximum or largest percentage value within a given set or group of data.

Wage Rate

The amount of compensation an employee receives per unit of time or per task, typically expressed as an hourly rate or per piece rate.