Financial Leverage Results from the Presence of Variable Financial Costs

question 125

True/False

Financial leverage results from the presence of variable financial costs in the firm's income stream.

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Definitions:

Buy-And-Hold

An investment strategy where securities are purchased and held for a long period to mitigate the effects of market volatility.

Equally Weighted

A type of investment strategy where each asset in a portfolio is given the same investment weight regardless of its size, market capitalization, or other characteristics.

Value-Weighted

A method of calculating a stock index where each stock affects the index in proportion to its market value.

TIPS

Treasury Inflation-Protected Securities, a type of U.S. treasury security indexed to inflation to protect investors from the negative effects of rising prices.