Which of the Following Statements Is True for Financial Leverage

question 50

Multiple Choice

Which of the following statements is true for financial leverage?

• A) The asset turnover ratio measures financial leverage.
• B) Financial leverage always increases profitability.
• C) Financial leverage is measured in the proportion of total assets relative to total equity.
• D) The higher the debt to equity ratio, the higher the financial leverage.

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Definitions:

Comparative Income Statements

Financial reports that provide a side-by-side comparison of a company's income, expenses, and net earnings over different periods, facilitating trend analysis and performance evaluation.

Horizontal Analysis

A financial analysis technique that compares historical financial data over a series of reporting periods to identify trends and growth patterns.

Comparative Income Statements

Financial statements that present the revenues, expenses, and net income of a company over multiple periods for comparison.