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    Business
  3. Study Set
    Finance Applications and Theory Study Set 2
  4. Exam
    Exam 16: Assessing Long-Term Debt, equity, and Capital Structure
  5. Question
    Why Is Debt Often Referred to as Leverage in Finance
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Why Is Debt Often Referred to as Leverage in Finance

Question 1

Question 1

Multiple Choice

Why is debt often referred to as leverage in finance?


A) Debt magnifies the firm's total asset turnover.
B) Debt magnifies both the potential returns and the risk to bondholders.
C) Debt magnifies both the potential returns and the risk to equity holders.
D) None of these.

Correct Answer:

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