Welcome to Westonci.ca, your go-to destination for finding answers to all your questions. Join our expert community today! Connect with a community of experts ready to provide precise solutions to your questions on our user-friendly Q&A platform. Experience the ease of finding precise answers to your questions from a knowledgeable community of experts.
Sagot :
A company's return on equity increases at an optimum level of financial leverage because the use of leverage increases the stock volatility, increasing the level of risk which then increases the returns.
Financially over-leveraged companies may face a decrease in return on equity.
How does business risk affect capital structure?
With positive bankruptcy costs, an increase in business risk decreases the proportion of debt in the capital structure.
With higher business risk, stand-alone firms will prefer less debt as they are more likely to face financial distress.
What is leverage risk?
An investor who has enough cash to acquire an asset but chooses to use a mixture of debt and cash will have remaining cash left over.
Learn more about leverages here:
https://brainly.com/question/26588732
#SPJ4
We appreciate your time on our site. Don't hesitate to return whenever you have more questions or need further clarification. Thank you for your visit. We're committed to providing you with the best information available. Return anytime for more. We're here to help at Westonci.ca. Keep visiting for the best answers to your questions.
