When only equity counts as capital, the higher the capital ratio, the
A) lower the leverage measure.
B) lower the degree of financial leverage.
C) higher the leverage measure.
D) A and B
E) B and C

Question

Quizplus · Accepted Answer

A higher capital ratio indicates more equity relative to assets, which reduces leverage and financial risk, leading to a lower leverage measure and degree of financial leverage.

When Only Equity Counts as Capital, the Higher the Capital