________ refers to the effects that fixed costs have on the returns that shareholders earn.
A) Purchase power parity
B) Leverage
C) Business risk
D) Pecking order theory

Question

Quizplus · Accepted Answer

Leverage refers to the use of fixed costs, such as interest on debt, to amplify the potential returns of shareholders. However, it also increases the risk and volatility of those returns. Therefore, the effects of fixed costs on shareholder returns are commonly associated with the concept of leverage.

________ Refers to the Effects That Fixed Costs Have on the Returns