Which of the Following Statements Is Correct

Which of the following statements is correct?

A) The effect of increasing a firm's use of financial leverage is to decrease the volatility of the firm's earnings.
B) The effect of increasing a firm's use of financial leverage could be either to increase or decrease the volatility of the firm's earnings depending on how much leverage is utilized.
C) The effect of increasing a firm's use of financial leverage is to increase the volatility of the firm's earnings.
D) None of the statements are correct.

Correct Answer:

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