Financial Leverage

question 96

Multiple Choice

Financial leverage

• A)may increase the return to the common shareholders.
• B)uses lower cost borrowed funds and earns a higher rate of return on those funds than their cost.
• C)requires the common shareholders to take on more risk in their investment.
• D)all of the above
• E)none of the above

---

Definitions:

Existing Firms

Companies or businesses that are currently operating in the market, as opposed to new startups or entities planning to enter the market.

Economic Losses

Economic Losses indicate a situation where the total cost of a business or activity exceeds the total revenue generated, resulting in a net loss.

Long-run Equilibrium

A state in economics where all factors of production and economic agents are fully adjusted to the conditions, and no further tendency for change exists.

Competitive Price-searcher Market

A market structure where firms have some control over their selling price because their products are differentiated.