The term "financial leverage" originated from the notion that there is a multiplicative effect on financial performance measured at ____ when borrowed money is used to support the firm.
A)return on assets
B)return on equity
C)earnings per share
D)Both b and c

Question

Quizplus · Accepted Answer

Financial leverage refers to the use of borrowed funds to increase the potential return on equity and earnings per share. It amplifies the effects on both these metrics, not directly on return on assets.

The Term "Financial Leverage" Originated from the Notion That There