When a company uses borrowed money to earn a higher profit than the cost of the interest,this is called:
A)the asset multiplier effect.
B)the debt multiplier effect.
C)trading on the equity.
D)riding the interest effect.

Question

Quizplus · Accepted Answer

Trading on the equity refers to the practice of using borrowed funds to increase the potential return on equity, aiming to earn more from the investment than the cost of the borrowed funds.

When a Company Uses Borrowed Money to Earn a Higher