If the assets in which borrowed funds are invested are able to earn a rate of return greater than the interest rate required by the lender,then financial leverage is positive.

Question

Quizplus · Accepted Answer

Positive financial leverage is achieved when the rate of return on the assets financed by borrowed funds is greater than the cost of borrowing. This results in an increase in the return on equity for the investor.

If the Assets in Which Borrowed Funds Are Invested Are