Other Things Held Constant,the Higher the Degree of Total Leverage

question 109

True/False

Other things held constant,the higher the degree of total leverage exhibited by a firm,the greater the risk associated with that firm.

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Definitions:

Fixed Dividend

A type of dividend payment on preferred stock that remains constant and does not fluctuate with the earnings of the company.

Treasury Stock

Shares that were once in circulation but have been bought back by the issuing company, reducing the amount of outstanding stock on the open market.

Common Shares

Equity securities that represent ownership in a company; holders may vote on corporate matters and receive dividends.

Stock Dividend

A dividend payment made in shares of stock rather than cash, allowing shareholders to increase their shareholding without directly purchasing additional shares.