Interest Expense Creates Magnification of Earnings Through Financial Leverage Because

question 46

Multiple Choice

Interest expense creates magnification of earnings through financial leverage because:

• A)the interest rate is variable.
• B)interest accompanies debt financing.
• C)the use of interest causes higher earnings.
• D)interest costs are cheaper than the required rate of return to equity owners.
• E)while earnings available to pay interest rise,earnings to residual owners rise faster.

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Definitions:

Chlorophyll A

A type of chlorophyll that is the primary photosynthetic pigment in plants, allowing them to absorb light most efficiently.

Vascular Tissue

The specialized system of tubes and cells in plants that conduct water, nutrients, and sugars.

Desmosomes

Cell structures specialized for cell-to-cell adhesion, serving as anchoring junctions in areas of mechanical stress, such as skin and cardiac muscle.

Vascular Tissue

Plant tissue responsible for transporting water, nutrients, and sugars between different parts of the plant.