Which of the following statements is false?
A)Combined leverage is the effect on earnings produced by the operating and financial leverage.
B)There is strong empirical evidence that firms adjust their degrees of operating leverage and degrees of financial leverage to match some standard degree of combined leverage.
C)Financial risk is the additional risk, above business risk, resulting from substituting debt into the capital structure.
D)All the above statements are true.

Question

Quizplus · Accepted Answer

While there is some empirical evidence that firms consider their desired level of combined leverage when determining their operating and financial leverage, there is not strong evidence that they always adjust to match a standard degree of combined leverage. There are a variety of factors that can influence a company's decision on leverage, and different companies may have different target levels of combined leverage.

Which of the Following Statements Is False