About the use of debt financing

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Reference no: EM131606380

Which of the following statements about the use of debt financing (financial leverage) is incorrect? Both c and d look incorrect to me. Please explain.

a. In most situations, the use of debt financing increases the return to owners (say, as measured by ROE).

b. In all situations, the use of debt financing increases the riskiness to owners (shareholders).

c. Capital structure theory enables managers to precisely determine the optimal capital structure for any for-profit business.

d. Because debt financing "levers up" (increases) owners' returns, its use is called "financial leverage."

Reference no: EM131606380

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