The use of debt finance by a company (gearing) has a potential impact on which of the following?

Question

Quizplus · Accepted Answer

The use of debt finance by a company can increase the risk associated with the company as they have to make interest payments on the debt regardless of their profitability. It can also increase the variability of net profit as interest payments are a fixed expense that must be paid regardless of the level of sales or profits. Additionally, the return obtained by the shareholder can be affected as the company's profits may be reduced due to interest payments on the debt. Therefore, all of the options are potentially impacted by the use of debt finance (gearing).

The Use of Debt Finance by a Company (Gearing) Has