If a Company Earns More with the Money It Borrows

question 194

True/False

If a company earns more with the money it borrows than it has to pay to borrow that money,it has positive financial leverage.

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Definitions:

Adjusting Entries

Journal entries made in accounting to update the accounts and bring them to their correct balances before the preparation of financial statements.

Period End

The conclusion of a specific accounting period, at which point financial statements are prepared.

Adjusting Entry

A journal entry made in accounting records at the end of an accounting period to allocate income and expenditure to the appropriate periods.

Adjusting Entries

At the conclusion of an accounting cycle, entries are documented in the accounting ledger to distribute revenues and costs to the actual period they happened.