__________Is a Term Used to Describe the Magnification of Risk

question 27

Multiple Choice

__________is a term used to describe the magnification of risk and return introduced through the useof fixed cost financing such as preferred stock and long-term debt.

• A) Financial leverage
• B) The acid-test
• C) Fixed-payment coverage
• D) Operating leverage

---

Definitions:

Microeconomic Principles

The study of individual, household, and firm behaviors in decision-making and allocation of resources, often in markets where goods or services are bought and sold.

Preferred Spending

Often refers to the prioritization of budget allocation by individuals, businesses, or governments, favoring certain categories or sectors over others.

Canoeing and Kayaking

Recreational or competitive water sports involving navigating waterways in small, narrow vessels.

Overconfident

A cognitive bias where an individual's subjective confidence in their judgements is greater than their objective accuracy.