Which of the following statements is most correct?
A)firms with relatively low debt ratios have higher expected returns when the business is good.
B)firms with relatively low debt ratios are exposed to risk of loss when the business is poor.
C)firms with relatively high debt ratios have higher expected returns when the business is bad.
D)firms with relatively high debt ratios have higher expected returns when the business is good.
E)none of the above.

Question

Quizplus · Accepted Answer

Firms with high debt ratios can leverage their debt to amplify returns when business conditions are favorable, leading to higher expected returns.

Which of the Following Statements Is Most Correct