Asked by

Chacon Collins
on Dec 01, 2024

verifed

Verified

The term "financial leverage" originated from the notion that there is a multiplicative effect on financial performance measured at ____ when borrowed money is used to support the firm.

A) return on assets
B) return on equity
C) earnings per share
D) Both b and c

Financial Leverage

The use of borrowed funds to finance the acquisition of assets, with the expectation that the income or capital gain from the assets will exceed the cost of borrowing.

Return on Equity

A measure of a corporation's profitability that reveals how much profit a company generates with the money shareholders have invested.

Earnings per Share

A financial metric calculated by dividing a company's net income by the number of outstanding shares, indicating how much profit a company makes per share of stock.

  • Acquire knowledge about financial leverage and its influence on stock price and corporate valuation.
  • Comprehend the effects of fixed-cost financing and the definition of financial leverage.
verifed

Verified Answer

CS
Cornasia SuttonDec 06, 2024
Final Answer:
Get Full Answer