Homework Answers
Answer for the above question is False.
Reason -
Decline in sales result in low profit for the company at the same time increase in financial leverage means company is buying assets more through debt.
In the above scenario if the assets bought through debts are giving return more that the interest rates to manage those borrowings then there is not decline in loss in such case.
Lower profit margin could be through lower sales but increase in financial leverage can not be the reason to low the profit margin.
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