Equity in a firm with debt is called:
A)levered equity.
B)riskless equity.
C)unlevered equity.
D)risky equity.

Question

Quizplus · Accepted Answer

Equity in a firm with debt is called levered equity because it is affected by the leverage, or the amount of debt, in the firm. Levered equity is riskier than unlevered equity because it is subject to both the risk of the business itself and the risk of the debt financing. Riskless equity does not exist in practice, and risky equity is not a commonly used term.

Equity in a Firm with Debt Is Called