Which of the following statements is TRUE? (Assume good business conditions). Hint: Capital Structure is how you finance your assets with either debt or equity. Also, think about Table 4.1 on page 118 (Section 4-4 in the eBook) when answering this question. Hint: ROE is Return on Equity.

A firm with debt (financial leverage) will have a larger return on equity (ROE) than an otherwise identical firm with no debt in its capital structure.

A firm with debt (financial leverage) will have a lower return on equity (ROE) than an otherwise identical firm with no debt in its capital structure.

All else equal, a firm with a higher debt ratio will have a lower return on common equity (ROE).

All of these selections are correct

None of these selections are correct