Financial Leverage

Debt over equity is the formula for financial leverage. Which of the following shows the correct formula for $250,000 ownership and $400.000 debt?

A

Financial leverage is the ratio of debt over equity. Which of the following is true regarding leverage? A. The lower the leverage, the safer the business. B. The higher the leverage, the safer the business. C. The steeper the leverage, the safer the business.

A

The lower the leverage, the safer the business. Which of the following is the most desirable leverage?

A

Debt over equity is the formula for which of the following? A. percentage change B. financial leverage C. income statement

B

Financial leverage is a ratio of debt and equity. Which of the following is the formula for financial equity? A. equity over debt B. debt over equity C. debt equals equity

B

Too much debt can be bad for business. What can happen if a business has debt it cannot pay? A. Budgets and financial statements can pay the debt. B. Assets can be taken to pay the debt C. In a recession, businesses do not have to pay the debt.

B