As leverage rises, risk Rises because a negative event increases the prospect of Bankruptcy
The biggest risk that arises from high financial leverage occurs when a company's return on ROA does not exceed the interest on the loan, which greatly diminishes a company's return on equity and profitability.
Why Is Leverage Risky?
Leverage extends an investor's exposure to a market and may also put them into a risky situation. this is often particularly true for an investor who is purchasing more than they can afford
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