The Use of Personal Borrowing to Change the Overall Amount

question 77

Multiple Choice

The use of personal borrowing to change the overall amount of financial leverage to which an individual is exposed is called:

• A)homemade leverage.
• B)dividend recapture.
• C)the weighted average cost of capital.
• D)private debt placement.
• E)personal offset.

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Definitions:

Normal Profit Rate

Zero economic profit, providing just the competitive rate of return on the capital (and labor) of owners. An above-normal profit will draw more entry into the market, whereas a below-normal profit will lead to an exit of investors and capital.

Contestable Market

A market where companies can enter and exit freely, with low barriers to entry and exit, leading to competitive prices and efficient outcomes.

Low Entry And Exit

Refers to markets where there are minimal barriers to starting or exiting a business, leading to high levels of competition and innovation.

Highly Contested

Describes a situation, item, or issue that is the subject of intense competition or dispute among parties.