If a firm increases its leverage, which extended Du Pont equation ratio is directly affected?

Question

Quizplus · Accepted Answer

The equity multiplier, which measures the amount of debt a company uses to finance its assets, is directly affected by changes in leverage. Increasing leverage by taking on more debt will increase the equity multiplier, allowing the firm to potentially earn greater returns on equity. Therefore, the correct answer is B) Equity Multiplier.

If a Firm Increases Its Leverage, Which Extended Du Pont