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Financial leverage is associated with :

(A) Unstable return

(B) Proportion of debt

(C) High investment

(D) Proportion of equity

Choose the correct answer from the options given below:

Solution

✅ Correct Option: 4

Financial leverage refers to the proportion of debt in the overall capital of a firm and is computed as D/ED/E or D/(D+E)D/(D+E), where D is debt and E is equity. It is thus associated with the proportions of debt and equity in the capital structure. Hence (B) and (D) only.

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