What does the term financial leverage mean?
A)The ability of a company to pay off its current liabilities
B)The ability of a company to generate cash flows
C)The amount of profit earned by one share of ordinary shares
D)The proportion of a company's total capital that is financed by debt,as opposed to equity

Question

Quizplus · Accepted Answer

Financial leverage refers to the use of debt financing to increase the potential return on investment. The more debt a company uses to finance its operations, the higher its financial leverage. This can be measured by the proportion of a company's total capital that is financed by debt, as opposed to equity.

What Does the Term Financial Leverage Mean