Which of the following statements is TRUE for financial leverage?
A) The asset turnover ratio measures financial leverage.
B) Financial leverage always increases profitability.
C) Financial leverage is measured in the proportion of total assets relative to total equity.
D) The higher the debt to equity ratio, the higher the financial leverage.
D) The higher the debt to equity ratio, the higher the financial leverage.
Financial leverage is directly related to the debt ratio. The higher the debt ratio, the higher
the financial leverage.
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