Which one of the following statements concerning financial leverage is correct?
A)The benefits of leverage are unaffected by the amount of a firm's earnings.
B)The use of leverage will always increase a firm's earnings per share.
C)The shareholders of a firm are exposed to less risk anytime a firm uses financial leverage.
D)Changes in the capital structure of a firm will generally change the firm's earnings per share.
E)Financial leverage is beneficial to a firm only when the firm has negative earnings.

Question

Quizplus · Accepted Answer

Changes in a firm's capital structure, such as the use of debt, can affect the firm's earnings per share due to the impact of interest expenses and the potential for increased returns on equity.

Which One of the Following Statements Concerning Financial Leverage Is