Financial leverage measures which of the following?
A) the profit generated for every dollar of investment by the shareholders
B) the ability to convert sales dollars to profit
C) how many dollars of assets are employed for each dollar of shareholders' investment
D) the sales revenue generated by effective asset management

Question

Quizplus · Accepted Answer

Financial leverage measures how many dollars of assets are employed for each dollar of shareholders' investment. It shows the extent to which a company is relying on debt to finance its assets. A high degree of financial leverage means a company has a high proportion of debt in its capital structure, which can increase potential profits but also increase the risk of financial distress.

Financial Leverage Measures Which of the Following