Which of the following statements is correct?
A)The return on equity increases as leverage increases.
B)The earnings per share decreases as leverage increases.
C)The risk of the equity remains constant as leverage increases.
D)All of the above.

Question

Quizplus · Accepted Answer

The return on equity (ROE) increases as leverage increases because leveraging involves using borrowed funds for investment, potentially amplifying the returns on equity if the investments perform well. However, it also increases the risk.

Which of the Following Statements Is Correct