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Question

The leverage of a firm is related to a _______________.

A
Output measure
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B
Profit measure
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C
Investment measure
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D
All the above
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Solution

The correct option is B Profit measure
Financial leverage ratio helps in determining the effect of debt on the overall profitability of the company – high financial leverage means the fixed cost of running the business are high, whereas, lower financial leverage implies lower fixed cost investment in the business.

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