Why Are Leverage Ratios Important

question 52

Multiple Choice

Why are leverage ratios important?

• A) Low ROA can generate high ROE if the company is highly levered.
• B) Leverage magnifies losses which increases risk.
• C) Leverage ratios measure a firm's ROA.
• D) High ROE can only be generated with high leverage.

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Definitions:

Clinical Judgment

The process by which healthcare professionals make decisions based on their expertise, knowledge, and patient observations.

Statistical Decision-making Model

A framework used to make decisions under uncertainty by applying statistical and probabilistic methods to analyze and weigh different possible outcomes.

Subjective

Refers to information or interpretation based on personal opinions, feelings, or attitudes rather than external facts or evidence.

Reliability

Refers to the ability of test scores to be interpreted in a consistent and dependable manner across multiple test administrations.