Interest Expense Creates Magnification of Earnings Through Financial Leverage Because

question 46

Multiple Choice

Interest expense creates magnification of earnings through financial leverage because:

• A)the interest rate is variable.
• B)interest accompanies debt financing.
• C)the use of interest causes higher earnings.
• D)interest costs are cheaper than the required rate of return to equity owners.
• E)while earnings available to pay interest rise,earnings to residual owners rise faster.

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Definitions:

Project Risk Management

The process of identifying, analyzing, and responding to project risks to minimize their impact.

Positive Float

The extra time available beyond a project's expected completion time, allowing for delays without affecting the deadline.

Negative Float

In project management, the amount of time by which a project task or activity must be accelerated to meet a deadline or to align with subsequent tasks.

Project Management Skills

Competencies required to effectively plan, execute, monitor, and close a project, including leadership, organizational, and communication skills.