Borrowing more money will always increase a company's return on equity because the company is using financial leverage,but it also adds to the riskiness of the company.

Question

Quizplus · Accepted Answer

While borrowing more money can increase a company's return on equity (ROE) by using financial leverage, it does not always do so. The increased debt also raises the financial risk, and if the cost of debt exceeds the returns generated from its use, it can actually decrease ROE.

Borrowing More Money Will Always Increase a Company's Return on Equity