[blank] occurs when a portion of the company's assets are financed with securities, such as debt and preference shares, which pay a fixed amount of return to investors.
A)Financial leverage
B)Operating leverage
C)Premium leverage
D)Fixed leverage

Question

Quizplus · Accepted Answer

Financial leverage refers to the use of debt and other securities to finance a portion of a company's assets. This creates fixed costs such as interest payments, regardless of the company's level of sales or profits. The use of financial leverage can increase a company's returns on equity, but it also increases the risk of financial distress if the company is unable to meet its interest payments.

[Blank] Occurs When a Portion of the Company's Assets Are