Use of leverage always increases the amount of business risk.

Question

Quizplus · Accepted Answer

Leverage involves using borrowed funds or debt to finance investments. While this can increase potential returns, it also increases the level of financial risk for the business. If the business is unable to generate enough revenue to cover its debt payments, it may face financial difficulty or even bankruptcy. Therefore, the use of leverage always increases the amount of business risk.

Use of Leverage Always Increases the Amount of Business Risk