The concept of leveraging in finance refers to ________.
A)the degree to which companies rely on foreign exchange to fund operations
B)how a company hedges its foreign currency obligations
C)the degree to which a firm funds the growth of a business by debt
D)how much cash the CFO has in the bank

Question

Quizplus · Accepted Answer

Leveraging in finance refers to how much debt a company uses to fund the growth of the business. This debt can come in the form of loans or issuing bonds. By leveraging debt, a company can potentially increase its returns on investment, but it also increases the risk of financial distress if the business does not generate sufficient cash flow to meet its debt obligations. A, B, and D are not accurate descriptions of leveraging in finance.

The Concept of Leveraging in Finance Refers to ________