Small businesses with high leverage ratios are more vulnerable to economic downturns, but they have greater potential for large profits.

Question

Quizplus · Accepted Answer

This is because high leverage ratios (i.e. high levels of debt relative to equity) mean that the business has borrowed a significant amount of money to fund its operations. During economic downturns, when cash flow may be more limited and interest rates may be higher, it may be difficult for the business to service this debt. However, if the business is able to successfully operate and generate profits, the high leverage can amplify those profits and potentially lead to greater returns for the owners.

Small Businesses with High Leverage Ratios Are More Vulnerable to Economic