A company that uses leverage is attempting to earn an overall return that is higher than the cost of funds received from
A)preferred and common stockholders.
B)common stockholders only.
C)preferred stockholders and borrowed funds.
D)borrowed funds only.

Question

Quizplus · Accepted Answer

Leverage involves using borrowed funds or debt to finance operations or investments, aiming to earn a return that exceeds the cost of these funds. Preferred stock can also be considered a form of leverage due to its fixed dividend payments, similar to interest payments on debt.

A Company That Uses Leverage Is Attempting to Earn an Overall