Financial leverage could mean financing some of a firm's assets with
A) preferred stock.
B) retained earnings.
C) private equity capital.
D) sales revenues.

Question

Quizplus · Accepted Answer

Financial leverage involves financing a firm's assets or operations with borrowed funds or securities that have fixed costs, such as interest payments. Preferred stock is a form of financing that provides a fixed dividend payment, similar to debt, making it an example of financial leverage. Retained earnings, private equity capital, and sales revenues are not necessarily sources of financial leverage, although they can be used to finance a firm's assets or operations.

Financial Leverage Could Mean Financing Some of a Firm's Assets