The concept of leverage is
A) it is appropriate to borrow if the return on the assets is greater than the cost of the financing.
B) it is appropriate to borrow as long as the lender approves the loan.
C) it is unfavorable to borrow funds rather than raise the capital from stockholders.
D) that a high debt-to-equity ratio is favorable.

Question

Quizplus · Accepted Answer

The concept of leverage is that it can be appropriate to borrow funds as long as the return on the assets purchased with those funds is greater than the cost of the financing. This allows a company to earn a higher return on investment than they would if they only used their own equity to make purchases. It is important to note, however, that borrowing too much can also increase financial risk.

The Concept of Leverage Is