Leverage means using borrowed money to do which of the following? Select one: a. Earn a...
Leverage means using borrowed money to do which of the following?
Select one:
a. Earn a return greater than the cost of borrowing.
b. Earn a return less than the cost of borrowing.
c. Earn a return equal to the cost of borrowing.
d. Retire other long-term debt, such as bonds.
Homework Answers
Leverage means using borrowed money to Earn a return greater than the cost of borrowing.
Correct option is (a)
When the returns earned from the use of the borrowed funds are less than the cost of the borrowed funds, it results in negative leverage. Positive leverage occurs when the returns earned from the use of the borrowed funds are more than the cost of borrowed funds. Thus, positive leverage and leverage have the same meaning.
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