Which statement best explains the concept of "leverage"?
A)A measure of the efficiency of the company.
B)A measure of solvency of the company.
C)A measure of the company's operations.
D)A measure of the company's debt-paying ability.

Question

Quizplus · Accepted Answer

Leverage refers to the use of debt (or borrowed funds) by a company to finance its operations and investments, which is directly related to the solvency of the company. Solvency measures a company's ability to meet its long-term obligations and thus directly relates to how much leverage or debt the company is using.

Which Statement Best Explains the Concept of "Leverage