The higher the debt ratio,the more the financial leverage a firm has and thus,the greater will be its risk and return.

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A higher debt ratio means that a company is relying more on debt to finance its operations and growth, which increases its financial leverage. While financial leverage can increase the return on investment when things are going well, it also increases risk in the form of interest payments and the obligation to repay debt regardless of the company's performance. Therefore, higher financial leverage typically correlates with higher risk and return.

The Higher the Debt Ratio,the More the Financial Leverage a Firm