Why Is Debt Often Referred to as Leverage in Finance

question 1

Multiple Choice

Why is debt often referred to as leverage in finance?

• A)Debt magnifies the firm's total asset turnover.
• B)Debt magnifies both the potential returns and the risk to bondholders.
• C)Debt magnifies both the potential returns and the risk to equity holders.
• D)None of these.

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Definitions:

Persuasion

The act of convincing others to change their attitudes, beliefs, or behaviors through argument, appeal, or explanation.

Likeability

The quality that makes a person or thing pleasant, enjoyable, or agreeable, facilitating positive social interactions and acceptance.

Persuasion Tactics

Strategies or methods employed to influence others' attitudes, beliefs, or actions towards a particular viewpoint or decision.

Stereotypes

Oversimplified and generalized beliefs about a group of people that often ignore individual differences.