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:

Original Jurisdiction

The authority of a court to hear a case for the first time, as opposed to hearing an appeal from a lower court.

Supreme Court

The highest judicial court in a country or state, which often has the ultimate appellate jurisdiction.

Exclusive Jurisdiction

The sole power of a court over the particular case or legal issue.

Affidavit

A written statement made under oath, used as evidence in court.