A. An organization has a rate of return on equity of 20% and a rate of return on assets of 15%. Financial leverage refers to the use of borrowed funds to increase the potential return on equity. When the return on equity (ROE) is higher than the return on assets (ROA), it suggests that the organization is effectively using leverage to enhance its returns for equity shareholders.
I think C is the correct one. When we say Financial Leverage, it refers to the borrowing of capital by a corporation from lenders, such as banks, to fund its operations and long-term investments in fixed assets (PP&E). Seems like C is the only choice that might relate to the definition. Any other thoughts?
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1 month, 1 week agoElvin
6 months, 2 weeks agoKonradK
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