The Smaller the Fraction of an Investment Financed by Borrowing

question 180

Multiple Choice

The smaller the fraction of an investment financed by borrowing

• A)the greater the potential return and potential loss on that investment.
• B)the smaller the potential return and potential loss on that investment.
• C)the greater the potential return and the smaller the potential loss on that investment.
• D)the smaller the potential return and the greater the potential loss on that investment.

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Definitions:

Interest Rate

The rate at which interest is imposed on a loan for the borrower, often expressed as an annual percentage of the outstanding loan.

Average Daily Float

The average amount of uncollected funds represented by checks in the process of clearing.

Collection Delay

The time lag between when a sale is made or service rendered and when the payment is actually received.

Cash Balance

The amount of cash a company has on hand at any given time, which includes currency, coins, and balances in checking and savings accounts.