Financial leverage:
A)arises because most borrowed funds have a fixed interest rate.
B)arises because most borrowed funds have a variable interest rate.
C)usually has no bearing on the risk associated with a company.
D)is a concept that does not apply to individuals.

Question

Quizplus · Accepted Answer

Financial leverage arises because most borrowed funds have a fixed interest rate, which can amplify the effects of changes in operating income on the returns to equity holders.

Financial Leverage