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Using Borrowed Funds in an Attempt to Earn a Return

question 55

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Using borrowed funds in an attempt to earn a return greater than the cost of borrowing is referred to as:


Definitions:

Materials Cost

The expense associated with the raw materials used in the production of goods or services.

Capital Investment Analysis

The process by which management plans, evaluates, and controls investments in fixed assets.

Present Value

The value of an asset or cash at present that is equivalent in value to a specified sum in the future.

Average Rate of Return

A financial ratio used to estimate the profitability of an investment, calculated by dividing the average annual profit by the initial investment cost.

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