Which of the following most likely indicates that a company is making good use of financial leverage?
A)The price-earnings ratio exceeds that of competitors.
B)Earnings per share is higher than the dividends paid per share.
C)Net income is higher than cash from operations.
D)Return on common stockholders' equity is higher than the return on total assets.

Question

Quizplus · Accepted Answer

Return on common stockholders' equity is a measure of how effectively a company is using its financial leverage. If the return on common stockholders' equity is higher than the return on total assets, it indicates that the company is able to generate higher profits for its shareholders by using financial leverage effectively. This is a good indication that the company is making good use of financial leverage.

Which of the Following Most Likely Indicates That a Company