The use of fixed-cost financing is referred to as:

A) operating leverage.
B) a leveraged buyout.
C) financial leverage.
D) combined leverage.

Fixed-cost Financing

Refers to the method of raising capital where the company incurs fixed financial charges, such as interest on bonds or dividends on preferred stock, regardless of its financial performance.

Financial Leverage

A strategy involving the use of borrowed money to increase the potential return of an investment.

Operating Leverage

The use of fixed as opposed to variable cost in a firm’s cost structure.