Question
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.
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