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

Question

Quizplus · Accepted Answer

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

The Effect of Financial Leverage on the Performance of the Firm