________ is the ability of a firm to finance an investment through borrowed funds.

Question

Quizplus · Accepted Answer

Leverage refers to the use of borrowed funds to finance investments. It can increase a firm's returns, but also increases its risk of bankruptcy. Liquidity refers to a firm's ability to meet short-term obligations, solvency refers to a firm's ability to meet its long-term obligations, and profitability refers to a firm's ability to generate profits. None of these directly relate to financing an investment through borrowed funds.

________ Is the Ability of a Firm to Finance an Investment