Financial leverage is greater:
A)The lower the amount of interest expense and debt repayment commitments.
B)The greater the amount of interest expense commitments but not debt repayment commitments.
C)The lower the amount of debt repayment commitments but not interest expense commitments.
D)The greater the amount of interest expense and debt repayment commitments.
E)Both b and c

Question

Quizplus · Accepted Answer

Financial leverage is the use of debt financing to increase the potential return on equity investment. Therefore, the greater the amount of interest expense and debt repayment commitments, the greater the financial leverage, as more debt is being used to finance operations.

Financial Leverage Is Greater