The main advantage of financial leverage is that:
A) it forgoes the need for companies to pay their creditors.
B) it protects companies from going bankrupt.
C) it magnifies the financial return on the investment of stockholders when times are good.
D) it protects companies from predatory lending practices by financial institutions.

Question

Quizplus · Accepted Answer

Financial leverage allows companies to use borrowed funds to increase their investment capacity, which can lead to higher returns on equity when the company performs well.

The Main Advantage of Financial Leverage Is That