As a firm increases its level of debt relative to its level of equity, the firm is ________.
A) increasing the fraction of its equity
B) decreasing the fraction of its debt
C) decreasing its leverage
D) increasing its leverage

Question

Quizplus · Accepted Answer

Leverage is the degree to which a firm uses debt (or leverage) in its capital structure. As a firm increases its level of debt relative to its equity, it is increasing its leverage.

As a Firm Increases Its Level of Debt Relative to Its