As a Company Increases Its Financial Leverage, Improvements in ROE

question 116

True/False

As a company increases its financial leverage, improvements in ROE and EPS result from the fact that it pays more for the use of borrowed money than it earns from the money.

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Definitions:

Mixture

A physical combination of two or more substances that retain their own identities and properties and can be separated by physical means.

Compound

A substance made up of two or more different elements chemically bonded together in a fixed ratio.

Alloy

A mixture of metals or a mixture of a metal and another element, achieved through melting and mixing.