Borrowing Money ______

question 44

Multiple Choice

Borrowing money ______.

• A) creates leverage
• B) increases financial flexibility
• C) decreases risk to shareholders
• D) decreases expected returns to shareholders due to interest payments

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Definitions:

Amounts of Factors

The quantities of inputs or resources (such as labor, capital, and materials) used in the production of goods or services.

Three-Factor Production Function

A mathematical model in economics that describes output as a function of three inputs: labor, capital, and land or raw materials.

Factor Prices

The prices of inputs used in the production of goods and services, such as labor, capital, and raw materials.

Cost of Production

The total expenditure incurred in manufacturing a product or providing a service, including raw materials, labor, and overhead costs.