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3. Which one of the following statements concerning financial leverage is correct? a. If a firms debt-equity ratio increases, the firms financial leverage decreases. b.

3. Which one of the following statements concerning financial leverage is correct?

a. If a firms debt-equity ratio increases, the firms financial leverage decreases.

b. Financial leverage affects a firms earnings per share but not the firms return on equity.

c. Financial leverage refers to the use of common stock.

d. Financial leverage magnifies both profits and losses.

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