Financial leverage can sometimes make a firm's earnings per share [blank].
A)higher
B)lower
C)A and B
D)plateau

Question

Quizplus · Accepted Answer

Financial leverage, which involves using borrowed funds, can increase a firm's earnings per share if the investment returns exceed the cost of borrowing. However, it can also decrease earnings per share if the cost of borrowing is higher than the returns on investment, making both A and B correct.

Financial Leverage Can Sometimes Make a Firm's Earnings Per Share