Financial Leverage Has to Do with

question 130

Multiple Choice

Financial leverage has to do with

• A) the usage of fixed cost financial securities to finance a portion of a firm's assets.
• B) using common stock to finance a portion of a firm's assets.
• C) the incurrence of fixed operating costs in the firm's income stream.
• D) a high gross profit margin.

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Definitions:

Spot Exchange Rate

The current rate for instant purchase or sale of a currency in the exchange market.

Futures Price

The agreed-upon price for a futures contract, which is a legal agreement to buy or sell a particular commodity or asset at a predetermined price at a specified time in the future.

Annual Risk-free Rate

The return on investment expected from a risk-free asset over a one-year period.

Futures Price

The agreed price for the future delivery of an asset in a futures contract market.