Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

A firm is approaching the next fiscal year with estimated revenue for their products exceeding $1.4 million. The company currently has no debt and pays

A firm is approaching the next fiscal year with estimated revenue for their products exceeding $1.4 million. The company currently has no debt and pays no taxes. Which of the following statements most accurately describes the company's present financial leverage and risk?

A. The company's degree of financial leverage is 0, thus its maximized its financial risk.

B. The company's degree of financial leverage is 1.0, thus it bears no financial risk.

C. The company's degree of financial leverage is greater than 1.0, thus it bears high financial risk.

D. The company's degree of financial leverage is negative, thus it bears low financial risk.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Principles of Cost Accounting

Authors: Edward J. Vanderbeck

16th edition

9781133712701, 1133187862, 1133712703, 978-1133187868

More Books

Students also viewed these Accounting questions

Question

9-16. How does the writer establish credibility?

Answered: 1 week ago

Question

9-3. How do emotional appeals differ from logical appeals? [LO-2]

Answered: 1 week ago