Which of the Following Is True of Leverage on Risk

question 3

Multiple Choice

Which of the following is true of leverage on risk of a project?

• A)Increasing the firm's debt decreases the beta per unit of equity investment.
• B)Risk per unit of equity investment will increase non-linearly in the D/E ratio if the debt is risk free.
• C)Risk per unit of equity investment will decrease non-linearly in the D/E ratio if the debt is risk free.
• D)Reducing equity increases the risk per unit of equity investment.

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Definitions:

Budgeted Cost PURCHASES

Budgeted cost purchases refer to the projected expenditure for acquiring goods or services as planned within a budget period, usually part of a company's purchasing budget.

Required for Production

The materials, labor, and overhead expenses needed to manufacture a product.

Accounts Receivable

Money owed to a business by its customers for goods or services delivered but not yet paid for, considered a current asset on the balance sheet.

Sales Collected

The actual revenue received from customers, including cash sales and collections on account receivables.