Holding all other factors constant, a firm that is subject to a greater level of business risk should employ more total leverage than an otherwise equivalent firm that is subject to a lesser level of business risk.

Question

Quizplus · Accepted Answer

A firm with a greater level of business risk should generally employ less total leverage to avoid exacerbating its risk exposure, as leverage amplifies the effects of fluctuations in operating income on net income.

Holding All Other Factors Constant, a Firm That Is Subject