A Company Whose Rate of Return on Investments Is Higher

question 110

Multiple Choice

A company whose rate of return on investments is higher than the interest rate on its debt is said to have

• A) unfavorable financial leverage.
• B) a sub-optimal capital structure.
• C) favorable financial leverage.
• D) negative financial leverage.

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Definitions:

Financial Structure

The mix of a company's liabilities and equity, including short-term and long-term debt, used to finance its operations and growth.

Marshaling Resources

involves organizing, deploying, and managing resources effectively to achieve specific goals or objectives.

Marketing Programs

Coordinated strategies and efforts to promote and sell products or services, including advertising, promotions, sales, and public relations activities.

Franchise Offering

A business arrangement where a franchisor grants a franchisee the right to use its trademark, brand, and business processes to sell goods or services.