The effect of financial leverage on the performance of the firm depends on:
A) The rate of return on equity
B) The firm's level of operating income
C) The current market value of the debt
D) The rate of dividend growth

Question

Quizplus · Accepted Answer

Financial leverage affects a firm's performance primarily through its impact on operating income, as it influences the firm's ability to cover fixed financial costs and affects profitability.

The Effect of Financial Leverage on the Performance of the Firm