A company's president arranges a business loan with the bank to help the company expand into overseas markets rather than selling common shares.Which term applies to the arrangement made with the bank?

Question

Quizplus · Accepted Answer

Financial leverage refers to the use of borrowed funds (debt) to finance the expansion of a business, rather than using equity (selling shares). This increases the potential return to the shareholders but also increases the risk.

A Company's President Arranges a Business Loan with the Bank