Using borrowed funds to generate additional profits for shareholders is referred to as:
A) Liquidity management.
B) Operational expansion.
C) Capital budgeting.
D) Financial leverage.

Question

Quizplus · Accepted Answer

Financial leverage refers to using borrowed funds to generate additional profits for shareholders by magnifying the returns on equity investments. This strategy can result in greater profits in times of profitability but can also increase losses in times of unprofitability.

Using Borrowed Funds to Generate Additional Profits for Shareholders Is