Research indicates that greater financial leverage has a positive impact on performance for firms in stable environments.

Question

Quizplus · Accepted Answer

Research has shown that in stable environments, greater financial leverage can lead to increased profitability and performance for companies. This is because stable environments allow firms to more accurately predict future cash flows and minimize the risks associated with higher leverage. However, in uncertain or turbulent environments, high levels of leverage can lead to financial distress and poor performance.

Research Indicates That Greater Financial Leverage Has a Positive Impact