A management that wanted to increase the financial leverage of its firm would:
A)raise additional capital by selling common stock.
B)try to increase its ROI by increasing margin.
C)raise additional capital by selling fixed interest rate long-term bonds.
D)try to increase its ROI by increasing asset turnover.

Question

Quizplus · Accepted Answer

Raising additional capital by selling fixed interest rate long-term bonds increases financial leverage because it involves taking on more debt, which amplifies the potential returns to equity holders.

A Management That Wanted to Increase the Financial Leverage of Its