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An Investor Can Create the Effect of Leverage on His/her

question 83

Multiple Choice

An investor can create the effect of leverage on his/her account by:
I. buying equity of an unlevered firm
II. by investing in risk-free debt like T-bills
III. by borrowing on his/her own account


Definitions:

Merchandise Purchases Budget

An estimation of the cost of goods a retail company plans to buy for a specific period.

Production Budget

A financial plan that estimates the number of units that must be produced within a specific period to meet anticipated sales demands and maintain inventory levels.

Sales Forecast

An estimate of the amount of goods or services a company expects to sell in a future period.

Activity Index

A measure used to estimate the level of activity or volume of production that affects costs in variable costing.

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