The Underlying Reason That Leverage May Increase Stock Price Is

question 112

Multiple Choice

The underlying reason that leverage may increase stock price is that under certain conditions:

• A)it increases risk, which in turn requires a larger return on equity.
• B)it improves performance measured in terms of EBIT and EPS.
• C)it improves performance measured in terms of ROE and EPS.
• D)it is cheaper to raise new debt than it is to raise new equity.

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Definitions:

Organizational Environments

The set of external and internal conditions that affect the operations, decisions, and strategies of an organization.

Personnel Files

Documents and records kept by an employer that contain employment history, performance evaluations, and other relevant information about an employee.

Principled Level

A standard or level of behavior based on adhering to explicit principles, values, or ethics.

Moral Development

The process of developing ethical principles and a sense of right and wrong behavior, often discussed in the context of psychological and educational theory.