Positive fiNancial Leverage Occurs in Which of the Following Situations

question 131

Multiple Choice

Positive financial leverage occurs in which of the following situations?

• A) Interest payments can be deducted for income tax purposes.
• B) The company's after-tax return on total assets is less than the after-tax cost of borrowing.
• C) The return to the owners is enhanced through the use of debt financing.
• D) Payment of resources to creditors is limited to the required interest payments while the return of the principal borrowed is not required.

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Definitions:

Complexity

The quality or state of having multiple interconnected parts or elements, leading to difficulty in understanding, predicting, or controlling outcomes.

Adaptability

The capacity to adjust one's thoughts, behaviors, or actions in response to new, changing, or uncertain environments or situations.

Autonomic Nervous System

The part of the nervous system responsible for control of the bodily functions not consciously directed, like breathing, the heartbeat, and digestive processes.

Heart Rate

The number of heartbeats per unit of time, usually measured in beats per minute (bpm).