If a firm borrows money,it is using financial leverage.

Question

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Financial leverage refers to the use of borrowed funds to invest in assets with the aim of increasing the potential return on investment. By borrowing money, the firm is able to acquire assets it would not have been able to afford without debt financing, thus increasing the potential return on investment. However, the use of financial leverage also increases the risk of losses if the investment does not perform as expected.

If a Firm Borrows Money,it Is Using Financial Leverage