Which of the following statements about leverage is not correct?
A)Measuring the degree of operating leverage is a form of measuring risk.
B)Decisions about the use of debt or equity affect a company's financial leverage.
C)Decisions about whether to use fixed or variable costs affect a company's operating leverage.
D)The degree of financial leverage measures the extent to which fixed costs are used to operate the business.

Question

Quizplus · Accepted Answer

The degree of financial leverage measures the extent to which a company has used debt to finance its operations, not the extent to which fixed costs are used.

Which of the Following Statements About Leverage Is Not Correct