Banks depend heavily upon borrowed funds supplied by customers with little owners' capital invested.This means that banks make heavy use of:

Question

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Financial leverage refers to the use of borrowed funds to finance investments. Since banks heavily rely on borrowed funds from customers, they make use of financial leverage. This allows them to increase their potential returns, but also increases their risk if the investments they make using borrowed funds do not perform well.

Banks Depend Heavily Upon Borrowed Funds Supplied by Customers with Little