The higher the capital structure leverage ratio, the _____ is the proportion of financing that common shareholders provide and the _____ is the proportion that creditors and preferred shareholders provide.Thus, the _____ the capital structure leverage ratio, the _____ is financial leverage.
A)higher; lower; higher; higher
B)lower; higher; higher; higher
C)higher; lower; higher; lower
D)lower; higher; higher; lower
E)lower; higher; lower; lower

Question

Quizplus · Accepted Answer

The higher the capital structure leverage ratio, the lower is the proportion of financing that common shareholders provide and the higher is the proportion that creditors and preferred shareholders provide. Thus, the higher the capital structure leverage ratio, the higher is financial leverage.

The Higher the Capital Structure Leverage Ratio, the _____ Is