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 more 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 more assets" is incorrect. Generally, having more assets can lower risk as it allows for greater financial flexibility and the ability to absorb unexpected financial setbacks. It is higher liabilities that increase financial risk.

Identify the Statement That Is Incorrect