Research indicates that greater leverage has a positive impact on performance for firms in stable environments,but a negative impact for firms in dynamic environments.

Question

Quizplus · Accepted Answer

This statement is true, as research has found that higher leverage can benefit firms in stable environments, as it allows them to generate higher returns on investments. However, in dynamic environments, where there is more uncertainty and risk, high levels of leverage can lead to financial distress and a negative impact on performance.

Research Indicates That Greater Leverage Has a Positive Impact on Performance