A company’s ability to earn more on borrowed money than the associated interest cost so that net income increases is called: A. Interest B. A debenture C. Financial leverage D. Covenants
A company’s ability to earn more on borrowed money than the associated interest cost so that net income increases is called: A. Interest B. A debenture C. Financial leverage D. Covenants
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
A company’s ability to earn more on borrowed money than the associated interest cost so that net income increases is called:
A. Interest
B. A debenture
C. Financial leverage
D. Covenants
Expert Solution
Step 1
Solution:
Financial leverage means company borrow money for investment in assets instead of investing own equity with expectation that amount earned from investment is more than borrowing costs.
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