A company’s ability to earn more on borrowed money than the associated interest cost so that net income increases is called: A. Interest B. A debenture C. Financial leverage D. Covenants
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A company’s ability to earn more on borrowed money than the associated interest cost so that net income increases is called:
A. Interest
B. A debenture
C. Financial leverage
D. Covenants
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- The cost of equity is ________. a.equal to the amount of asset turnover b.the interest associated with debt c.the weighted average cost of capital d.the rate of return required by investors to incentivize them to invest in a companyThe cost of equity is ________. Group of answer choices A. the interest associated with debt B. the rate of return required by investors to incentivize them to invest in a company C. the weighted average cost of capital D. equal to the amount of asset turnoverExplains the effect of debt on profit margin and return on assets (ROA).
- The factor payment for the use of financial capital (loans and equity investments) is called... (a)Interest and dividends. (b)Wages. (c)Rent. (d)Profit.Which of the following statements are true about the interest-burden ratio? Check all that apply: It can be expressed as EBIT/Interest Expense. If the company has no financial leverage, the interest-burden ratio will be equal to 0. A company with higher financial leverage will have a lower interest-burden ratio. If the company has no financial leverage, the interest-burden ratio will be equal to 1. It can be expressed as Net profits/Pretax profits.A. Which of the following is most closely associated with the cost of using assets? a. Asset utilization b. Sales revenue c. Proportion of debt and equity d. Average price B. Which of the following is most closely associated with the return on management’s use of assets? a. Cost of capital b. Mix of equity types c. Prime lending rate d. # of products sold
- A borrower’s personal investment in the operations of a business is called as. a. Conditions b. Capital c. Character d. CollateralWhich financial ratio measures a company's ability to pay its short-term obligations? a) Debt-to-equity ratio b) Current ratio c) Return on investment d) Gross profit marginA firm's financing costs include Select one:A. both A and B.B. interest expenseC. depreciation expense.D. costs of goods sold.
- The higher the _____________, the higher the financial risk, and the higher the ____________. a. Interest rate, business risk b. Financial leverage, operating risk c. Financial leverage, cost of capital d. Fixed operating cost, financial riskWhich of the following statements are true about the interest-burden ratio? Check all that apply: If the company has no financial leverage, the interest-burden ratio will be equal to 1. A company with higher financial leverage will have a lower interest-burden ratio. if the company has no financial leverage, the interest-burden ratio will be equal to 0. It can be expressed as Net profits/Pretax profits. It can be expressed as EBIT/Interest Expense.The discount rate used in a net present value analysis is the ________. A. rate of interest earned on a savings account B. rate of inflation C. rate of interest charged for debt financing of an investment D. required rate of return or the hurdle rate
