Other things held constant,a decline in sales and a simultaneous increase in financial leverage must result in a lower profit margin.

Question

Quizplus · Accepted Answer

A decline in sales would typically lead to lower profits, but an increase in financial leverage does not directly affect profit margins. Financial leverage amplifies the returns (or losses) on equity but does not inherently change the profit margin, which is calculated before the effects of financing are considered.

Other Things Held Constant,a Decline in Sales and a Simultaneous