Using Borrowed Funds to Increase the Rate of Return on an Investment

question 4

True/False

Using borrowed funds to increase the rate of return on an investment is called leverage.

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Definitions:

Profitable Projects

Projects that generate a financial gain or benefit exceeding their costs and investments.

Investment Centres

Divisions or units within an organization that are responsible for generating returns on the assets invested in them.

Residual Income

The amount of net income left over for a business after it has paid out dividends to its shareholders, often used as a measure of corporate and project profitability.

Investment Turnover

A financial ratio comparing the sales revenue a company generates to its current investment in assets, indicating efficiency in using investments to produce sales.