Other things equal,a higher leverage ratio implies:
A)a higher ROA.
B)lower financial risk for shareholders.
C)greater financial risk for shareholders.
D)a lower ROE.

Question

Quizplus · Accepted Answer

Higher leverage increases the financial risk for shareholders, as they have a higher amount of debt obligations to fulfill. It does not necessarily imply a higher return on assets (ROA) or a lower return on equity (ROE). Financial risk and leverage have an inverse relationship, meaning that higher leverage implies greater financial risk for shareholders.

Other Things Equal,a Higher Leverage Ratio Implies