If a firm uses an aggressive financing strategy,
A) it increases return and increases risk.
B) it increases return and decreases risk.
C) it decreases return and decreases risk.
D) it decreases return and increases risk.

Question

Quizplus · Accepted Answer

An aggressive financing strategy involves taking on a higher level of debt or leveraging in order to increase returns. However, this also increases the firm's risk because they now have a greater burden of debt repayment and interest payments. Therefore, an aggressive financing strategy increases both return and risk.

If a Firm Uses an Aggressive Financing Strategy