Leverage implies that a company a. contains debt financing. b. has a high current ratio. c. has a high earnings per share. d. contains equity financing.

Question

Business

Astro

14 September, 02:42

Leverage implies that a company a. contains debt financing. b. has a high current ratio. c. has a high earnings per share. d. contains equity financing.

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Answers (2)

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Sara Roach · Answer 1

The correct answer is letter "A": contains debt financing.

Explanation:

Leverage is when an investor or business makes use of borrowed money in an attempt to increase an investment's rate of return. Leverage often is used by businesses and individual investors to boost the profits they can make. Leverage is calculated best by using the debt to equity ratio (total debt by total equity).

Lilian Odonnell · Answer 2

a. contains debt financing

Explanation:

Company activities are sponsored through two sources namely; Equity and debt. Equity is the fund available to the business from the owners of the business while debt refers to fund from 3rd parties.

A company is said to be geared when it has some element of debt financing. This is the same as leverage. Hence Leverage implies that a company contains debt financing