[amp_mcq option1=”High debt proportion” option2=”Lower debt proportion” option3=”Equal debt and equity” option4=”No debt” correct=”option1″]<\/p>\n
The correct answer is A. High debt proportion.<\/p>\n
Financial leverage is the use of debt to finance assets. It increases the potential return on equity, but also increases the risk of financial distress. A high degree of financial leverage means that a company has a lot of debt relative to its equity. This can be a good thing if the company is able to generate high returns on its assets, but it can be a bad thing if the company is not able to generate enough cash flow to cover its debt payments.<\/p>\n
Option B is incorrect because a lower debt proportion means that a company has less debt relative to its equity. This would decrease the company’s financial leverage and make it less risky.<\/p>\n
Option C is incorrect because equal debt and equity means that a company has the same amount of debt as equity. This would not be considered a high degree of financial leverage.<\/p>\n
Option D is incorrect because no debt means that a company has no debt. This would be considered a low degree of financial leverage.<\/p>\n","protected":false},"excerpt":{"rendered":"
[amp_mcq option1=”High debt proportion” option2=”Lower debt proportion” option3=”Equal debt and equity” option4=”No debt” correct=”option1″]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[945],"tags":[],"class_list":["post-55068","post","type-post","status-publish","format-standard","hentry","category-financial-management","no-featured-image-padding"],"yoast_head":"\n