Question: An increase in debt-to-equity ratio indicates: A decrease in financial leverage An increase in financial leverage A decrease in dividend An increase in dividend According

An increase in debt-to-equity ratio indicates:

		A decrease in financial leverage
		An increase in financial leverage
		A decrease in dividend
		An increase in dividend

According to the trade-off theory of capital structure, currently, it is possible for Firm X to increase its firm value by decreasing its leverage. Which one of the following is not correct according to the trade-off theory of capital structure?

		Currently, if Firm X increases its leverage, its present value of interest tax shields will increase.
		Currently, if Firm X decreases its leverage, its present value of financial distress costs will decline.
		Currently, Firm Xs leverage is greater than its optimal leverage.
		Currently, if Firm X increases its leverage, its firm value will increase due to additional tax deductions.

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