_____ is a measure of the amount of debt relative to total investment.

Question

Quizplus · Accepted Answer

Financial leverage is a measure of the amount of debt relative to total investment. It indicates how much risk the company is taking on by using debt to finance its operations. High financial leverage can lead to higher returns if the company is successful, but also increases the likelihood of financial distress if the company is unable to meet its debt obligations. Cost of capital, optimum capital structure, and financial risk all relate to the financing decisions of a company, but do not specifically measure the amount of debt relative to total investment.

_____ Is a Measure of the Amount of Debt Relative