Which of the Following Statements Is Correct

question 51

Multiple Choice

Which of the following statements is correct?

• A)The effect of increasing a firm's use of financial leverage is to decrease the volatility of the firm's earnings.
• B)The effect of increasing a firm's use of financial leverage could be either to increase or decrease the volatility of the firm's earnings depending on how much leverage is utilized.
• C)The effect of increasing a firm's use of financial leverage is to increase the volatility of the firm's earnings.
• D)None of these statements is correct.

---

Definitions:

Perfection

In legal and financial contexts, it often relates to the process of securing a security interest in collateral, ensuring priority over other claims.

Financing Statement

A document filed by a creditor to indicate a security interest in the property of a debtor, used in securing loan agreements.

Perfection

In legal and finance contexts, the act of securing a priority interest in collateral to protect a secured loan or transaction.

Certificate of Deposit

A savings certificate entitling the bearer to receive interest, which has a fixed maturity date, and typically restricts withdrawal of funds before that date.