Positive Financial Leverage Occurs in Which of the Following Situations

question 107

Multiple Choice

Positive financial leverage occurs in which of the following situations?

• A) The company's after-tax return on total assets is less than the after-tax cost of borrowing.
• B) Payment of resources to creditors is limited to the required interest payments while the return of the principal borrowed is not required.
• C) The return to the owners is enhanced through the use of debt financing.
• D) Interest payments can be deducted for income tax purposes.

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Definitions:

Figure-Ground

A principle in gestalt psychology and visual perception, referring to how the eye differentiates an object (the figure) from its surrounding area (the ground).

Auditory Cortex

The region of the brain that processes auditory information, essential for understanding sounds and language.

Temporal Lobe

A region of the cerebral cortex involved in processing auditory information, as well as being important for memory and speech.

Sound Stimuli

Auditory inputs or noises that evoke a response from the sensory systems or the brain.