The higher the debt-to-equity ratio the greater the positive financial leverage.

Question

Quizplus · Accepted Answer

A higher debt-to-equity ratio indicates that a company is financing a larger portion of its operations through debt, which can increase financial risk if the company is unable to meet its debt obligations. Positive financial leverage occurs when borrowed funds generate a return greater than the cost of borrowing, but a higher debt-to-equity ratio does not inherently guarantee greater positive financial leverage.

The Higher the Debt-To-Equity Ratio the Greater the Positive Financial