Trading on the equity leverage)refers to the
A)Amount of working capital
B)Amount of capital provided by owners
C)Use of borrowed money to increase the return to owners
D)Number of times interest is earned

Question

Quizplus · Accepted Answer

Trading on equity leverage refers to the use of borrowed money to increase the return to owners. It involves using debt financing to buy assets or investments with the goal of generating higher returns than the cost of the debt. This can result in increased profits for the owners, but also carries higher risks as the borrowed funds must be paid back regardless of whether the investments generate a profit or loss. The amount of working capital (A), amount of capital provided by owners (B), and number of times interest is earned (D) are all important financial metrics, but they do not refer specifically to trading on equity leverage.

Trading on the Equity Leverage)refers to the