What effect have the transactions set out above in respect of loans had on Expansion's financial risk?
A) Increased the gearing and financial risk
B) Decreased the gearing and financial risk
C) Had a neutral effect

Question

Quizplus · Accepted Answer

The transactions related to loans show that Expansion has increased its borrowing, leading to higher gearing (debt-to-equity ratio). This indicates that Expansion has taken on additional financial risk, as higher levels of borrowing can result in greater vulnerability to economic fluctuations and higher interest expenses.

What Effect Have the Transactions Set Out Above in Respect