Leverage Results from the Use of Fixed-Cost Assets or Funds

question 118

True/False

Leverage results from the use of fixed-cost assets or funds to magnify returns to the firm's owners.

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Definitions:

T-bond Futures

Futures contracts that are agreements to buy or sell U.S. Treasury bonds at a predetermined price on a specified date in the future.

Incentive Bonus

A form of additional compensation used to motivate and reward employees beyond their regular pay for achieving specified performance targets.

Predetermined Benchmark

A pre-established standard or point of reference against which performance is measured.

Investment Profits

The earnings gained from the allocation of resources, such as money, into a financial asset with the expectation of a favorable return.