Financial Leverage: I.increases Expected ROE but Does Not Affect Its Variability.II.increases Breakeven

question 4

Multiple Choice

Financial leverage:
i.increases expected ROE but does not affect its variability.II.increases breakeven sales,like operating leverage,but increases the rate of earnings per share growth once breakeven is achieved.III.is a fundamental financial variable affecting sustainable growth.IV.increases expected return and risk to owners.

• A) I and II only
• B) I and III only
• C) II and IV only
• D) II,III,and IV only
• E) I,II,III,and IV

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Definitions:

Fundamental Characteristic

A basic or essential attribute that defines or distinguishes an entity or concept.

Scientific Approach

A method of inquiry that uses systematic, empirical, and objective methods to investigate phenomena, form hypotheses, and gather evidence to support or refute them.

Falsifiability

The principle that a good scientific idea or theory should be capable of being shown to be false when tested using scientific methods.

Empiricism

Use of objective observations to answer a question about the nature of behavior.