While increasing debt levels can increase the return on equity, it also reduces risk.

Name: While increasing debt levels can increase the return on equity, it also reduces risk.
Brand: Quizplus
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Question

Quizplus · Accepted Answer

Increasing debt levels can increase return on equity, but it also increases the company's financial risk. The higher the debt-to-equity ratio, the higher the risk of default or bankruptcy. Therefore, increasing debt levels does not reduce risk, but rather increases it.

While Increasing Debt Levels Can Increase the Return on Equity