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swat32
3 years ago
10

As EBIT drops, the return on equity (ROE) of a levered firm drops ______ the ROE of an otherwise identical unlevered firm.

Business
1 answer:
Pepsi [2]3 years ago
3 0

Answer:

Relatively more than

Explanation:

As we know,  

The levered firm is that firm in which debt is involved whereas unlevered firm is that firm in which there is no debt involved.  

As if the EBIT drops, the return on equity drop is relatively more than the ROE of unlevered firms due to involvement and not involvement of debt. As it generated high risk and return which is gradual increases during a given period of time  

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