If a Company Is Using Leverage Successfully, Which of the Following

question 5

Multiple Choice

If a company is using leverage successfully, which of the following will result?

• A)Their ROE will increase.
• B)Their ROE will decrease.
• C)Their cost of borrowing will increase.
• D)Their net income will decrease.

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Definitions:

Efficient

Efficiency refers to the optimal production and distribution of resources in a way that best meets the needs and desires of consumers.

Scarce Resources

Natural, human, and capital resources that are limited in supply and can be used for the production of goods and services.

Bowed Outward

Refers to the shape of a production possibility frontier that indicates increasing opportunity costs for producing two goods.

Opportunity Cost

The cost of foregone alternatives; the value of the best alternative given up when a decision is made to choose one option over another.