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With respect to leverage, which of the following statements is incorrect? a) A f

ID: 2694009 • Letter: W

Question

With respect to leverage, which of the following statements is incorrect? a) A firm with a high degree of leverage will, all other things being equal, experience higher earnings in the expansion phase of the economic (business) cycle. b) A firm with a high degree of leverage could face difficulty even if it was in a stable industry. c) Management should tailor the use of leverage primarily to meet the risk-taking desires of the common stockholders of the firm. d) None of the statements above are incorrect.

Explanation / Answer

c) Management should tailor the use of leverage primarily to meet the risk-taking desires of the common stockholders of the firm.

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