A firm with a very low debt-equity ratio might be able to increase return on equity by taking on additional debt.

Question

Quizplus · Accepted Answer

A firm with a low debt-equity ratio has a lower financial risk and therefore may be able to take on additional debt to finance new projects or expansions, increasing the firm's return on equity. However, taking on too much debt can also increase financial risk and may not be beneficial in the long run.

A Firm with a Very Low Debt-Equity Ratio Might Be