The Term "Financial Leverage" Originated from the Notion That There

question 173

Multiple Choice

The term "financial leverage" originated from the notion that there is a multiplicative effect on financial performance measured at ____ when borrowed money is used to support the firm.

• A)return on assets
• B)return on equity
• C)earnings per share
• D)Both b and c

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Definitions:

Debt-to-Equity Ratio

A ratio reflecting the comparative amounts of debt and equity used to finance a company’s assets.

Investment Needs

The amount of capital required to fund a project, purchase assets, or support operations within a business.

Regular Cash Dividend

A payment made by a firm to its shareholders from its profits in the form of cash.

Cyclical Dividend Policy

A dividend payment strategy by companies that varies depending on the economic cycle, with higher payouts during economic prosperity and lower or no dividends during downturns.