Positive leverage is defined as the use of debt at a cost ________________ than the return on the asset which __________________ the return on equity.

Question

Quizplus · Accepted Answer

Positive leverage occurs when the return on assets is greater than the cost of debt, resulting in an increase in the return on equity. Option B states that the cost of debt is less than the return on the asset, which is the definition of positive leverage. Options A, C, D, and E state contradictory relationships between the cost of debt and the return on assets/equity.

Positive Leverage Is Defined as the Use of Debt at a Cost