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If a Firm Earns 10% Return on Funds They Borrowed

question 192

True/False

If a firm earns 10% return on funds they borrowed at 15% interest, the owners of the firm realize a benefit from using leverage.


Definitions:

Type of Business

Categories or classifications of commercial organizations based on factors like ownership, size, and product or service rendered.

Chapter 7

A provision of U.S. bankruptcy law under which an individual or business liquidates assets to pay off debts under the guidance of a court-appointed trustee.

Trustee

Someone legally appointed to manage and administer property or assets for the benefit of another, often used in contexts like bankruptcy, trust funds, and estates.

IRA

An Individual Retirement Account, a financial tool designed to help individuals save for retirement with tax advantages.

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