The Ability to Obtain a Given Equity Position at a Reduced

question 14

Multiple Choice

The ability to obtain a given equity position at a reduced capital investment, and therefore magnify returns, is known as

• A) leverage.
• B) straddling.
• C) hedging.
• D) triple witching.

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Definitions:

Future Cash Flows

Estimates of the amounts of cash that a company expects to receive or pay out in the future, important for budgeting, forecasting, and valuation.

Interest-Bearing Note

A debt instrument that pays interest to the holder at a fixed or variable interest rate until the principal amount is repaid.

Adjusting Entry

A journal entry made at the end of an accounting period to allocate income and expenditures to the correct period.

Interest Expense

The expense recorded by a business for the funds it has borrowed, categorized as a non-operating expense in the income statement.