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What is financial leverage?

  1. A Using debt to finance assets in order to amplify returns to equity
  2. B Holding only cash and equivalents
  3. C Issuing new shares to raise capital
  4. D Reducing operating costs
Answer

Using debt to finance assets in order to amplify returns to equity

Leverage magnifies both gains and losses. Operating leverage is the analogous effect from a high proportion of fixed operating costs.

All Finance MCQs

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