Other things held constant,the more debt a firm uses,the lower its profit margin will be.

Name: Other things held constant,the more debt a firm uses,the lower its profit margin will be.
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Question

Quizplus · Accepted Answer

When a firm uses debt to finance its operations, it incurs interest expenses that reduce its net profit. This, in turn, leads to a lower profit margin, which is the ratio of net profit to revenue. Therefore, holding other factors constant, increasing debt can lead to lower profit margins.

Other Things Held Constant,the More Debt a Firm Uses,the Lower