Which of the following is true? (Assume good business conditions)

(Read all the selections before answering)

Debt (financial leverage) will always reduce a firms Return on Equity during good economic times.

None of these selections are correct

The more a company uses debt (financial leverage) the higher the companys net income will be.

Debt (financial leverage) will have no effect on a companys Return on Equity during good economic times.

Using debt (financial leverage) is a way management can try to increase (magnify) a firms Return on Equity during good economic times.