Why Is Debt Often Referred to as Leverage in Finance

question 102

Multiple Choice

Why is debt often referred to as leverage in finance?

• A) Debt magnifies the firm's total asset turnover.
• B) Debt magnifies both the potential returns and the risk to bondholders.
• C) Debt magnifies both the potential returns and the risk to equity holders.
• D) None of the options.

---

Definitions:

Identity Formation

The developmental process where a person forms a distinct sense of self and their personal identity, influenced by social, cultural, and personal experiences.

Developmental Psychologist

A psychologist who studies the psychological growth of individuals, from infancy through adulthood.

Adolescence

The developmental phase between childhood and adulthood, characterized by significant physical, psychological, and emotional changes.

Father Absence

The lack or significant reduction of a father's presence and involvement in a child's life, which can impact the child's development and behaviour.