Holding all other factors constant, a firm that is subject to a greater level of business risk should employ more financial 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 financial leverage to avoid compounding risk, as higher leverage increases the firm's financial risk on top of its existing business risk.

Holding All Other Factors Constant, a Firm That Is Subject