Which of the following is the best definition of homemade leverage?
A) A legal proceeding for liquidating or reorganizing a business. Also, the transfer of some or all of a firm's assets to its creditors.
B) The direct and indirect costs associated with going bankrupt or experiencing financial distress.
C) The equity risk that comes from the financial policy (i.e., capital structure) of the firm.
D) The use of personal borrowing to change the overall amount of financial leverage to which the individual is exposed.
E) The difficulties of running a business that is experiencing financial distress.

Question

Quizplus · Accepted Answer

Homemade leverage refers to the strategy of adjusting personal leverage through borrowing or lending, to alter the individual's exposure to financial risk, independent of the company's own capital structure decisions.

Which of the Following Is the Best Definition of Homemade