Which of the Following Is True About Financial Leverage

question 4

Multiple Choice

Which of the following is true about financial leverage?

• A)Financial leverage boosts the rate of return for the creditors of the firm.
• B)Financial leverage can increase the rate of return on owners' equity when the rate of return on invested assets is greater than the interest rate paid to creditors.
• C)Financial leverage is created when there is no debt and the rate of return is increased with an increase in sales.
• D)Financial leverage increases sales by increasing the amount invested in plant and equipment rather than financial assets such as bonds and stock.

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