Identify the statement that is incorrect.
A)Higher financial leverage involves higher risk.
B)Risk is higher if a company has more liabilities.
C)Risk is higher if a company has higher assets.
D)The debt ratio is one measure of financial risk.
E)Lower financial leverage involves lower risk.

Question

Quizplus · Accepted Answer

The statement "Risk is higher if a company has higher assets" is incorrect. Higher assets do not necessarily indicate higher risk, as risk is dependent on the relationship between assets and liabilities. Higher liabilities relative to assets would result in higher risk.

Identify the Statement That Is Incorrect