We Use the Term Leverage to Describe the Use of Debt

question 34

Multiple Choice

We use the term leverage to describe the use of debt in the firm' capital structure because:

• A) It magnifies the potential expected return to equity and the variability of that expected return.
• B) It magnifies the risk of bankruptcy.
• C) It magnifies earnings per share.
• D) None of these.

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Definitions:

Employee Involvement Approach

A strategy where employees are given the opportunity to participate in decision-making processes and contribute to problem solving and improvements in their workplace.

Managing Employee Benefits

The process of designing, implementing, and administering various compensation packages that an organization offers to its employees.

Laissez Faire Approach

A leadership style where managers provide minimal supervision and allow employees to take responsibility for their work.

FMLA Leave

A provision under the Family and Medical Leave Act allowing eligible employees to take unpaid, job-protected leave for specific family and medical reasons.