________ is a term used to describe the magnification of risk and return introduced through the use of fixed-cost financing, such as preferred stock and debt.
A) Financial leverage
B) Operating leverage
C) Fixed-payment coverage
D) Benchmarking

Question

Quizplus · Accepted Answer

Financial leverage is the term used to describe the magnification of risk and return introduced through the use of fixed-cost financing such as preferred stock and debt. It involves using borrowed funds or other fixed-cost financing options to increase the potential returns of an investment. However, this also increases the risk of losses if the investment does not perform as expected. Operating leverage, on the other hand, refers to the magnification of returns and risk resulting from fixed operating costs, such as rent and salaries. Fixed-payment coverage and benchmarking are not relevant to this concept.

________ Is a Term Used to Describe the Magnification of Risk