The use of financial leverage by the firm has a potential impact on which of the following?
(1) The risk associated with the firm.
(2) The return experienced by the shareholder.
(3) The variability of net income.
(4) The degree of operating leverage.
(5) The degree of financial leverage.
A) 1, 2, 3, 5
B) 2, 3, 5
C) 1, 3, 5
D) 2, 3, 4, 5
E) 1, 2, 5

Question

Quizplus · Accepted Answer

Financial leverage affects the firm's risk, shareholder return, net income variability, and degree of financial leverage.

The Use of Financial Leverage by the Firm Has a Potential