Leverage occurs when a company's
A)interest payments exceed its rate of return
B)rate of return equals its interest payments
C)rate of return exceeds its interest payments
D)interest payments are made on time

Question

Quizplus · Accepted Answer

Leverage occurs when a company's rate of return exceeds its interest payments. This means that the company is able to generate more profits than it has to pay in interest on its debt, which can lead to increased financial stability and growth opportunities. A and D do not accurately describe leverage, and B describes a scenario where the company is just breaking even on its debt.

Leverage Occurs When a Company's