A company has favorable financial leverage when it uses borrowed funds to earn a
ID: 2447659 • Letter: A
Question
A company has favorable financial leverage when
it uses borrowed funds to earn a higher rate of return than the rate of interest paid on the borrowed money.
it issues debt rather than capital stock.
earnings per share increase each year.
too much is paid out in cash for interest.
none of the above
a.it uses borrowed funds to earn a higher rate of return than the rate of interest paid on the borrowed money.
b.it issues debt rather than capital stock.
c.earnings per share increase each year.
d.too much is paid out in cash for interest.
e.none of the above
Explanation / Answer
A company has favorable financial leverage when
a) it uses borrowed funds to earn a higher rate of return than the rate of interest paid on the borrowed money.
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