Question

Identify the statement that is incorrect. a. Higher financial leverage involves higher risk. b. Risk is higher if a company has more liabilities. c. Risk is higher if a company has more assets. d. The debt ratio is one measure of financial risk. e. Lower financial leverage involves lower risk.

Answer 1

Answer:

c. Risk is higher if a company has more assets.

Explanation:

Financial leverage is the measurement of risk based on the debt of the company. More liabilities involves high risk  because company does not have enough to pay for the it's liabilities.  If company has more assets then the risk if lower because company is able to pay its liabilities from its assets. The statement " Risk is higher if a company has more assets" is incorrect.