The advantages of financial leverage accrue primarily to
A) management.
B) stockholders.
C) bondholders.
D) lenders.

Question

Quizplus · Accepted Answer

Financial leverage refers to the use of debt to finance a company's operations or investments. The use of debt increases the company's financial risk but also has the potential to increase returns for the stockholders. This is because the cost of debt is typically lower than the cost of equity, so using debt to finance operations can increase profits and earnings per share, leading to higher stock prices and dividends. Bondholders and lenders do not usually benefit from financial leverage in the same way that stockholders do.

The Advantages of Financial Leverage Accrue Primarily to