Asked by Ricky Swearingen on Apr 28, 2024

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A technique to increase the perceived return to equity shareholders is _______________________.

A) issuing new shares.
B) diluting existing shares.
C) deduce the use of debt.
D) through the use of leverage.

Use of Leverage

The practice of using borrowed money to increase the potential return of an investment, which also increases the risk of loss.

Diluting Existing Shares

A process where a company issues more shares, leading to a reduction in the ownership percentage of existing shareholders.

  • Evaluate the influence of financial leverage on an organization's net income and Return on Equity (ROE).
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ZK
Zybrea KnightMay 05, 2024
Final Answer :
D
Explanation :
The use of leverage (borrowing funds to finance the acquisition of assets) can increase the perceived return to equity shareholders by amplifying the potential returns on their investment. This is because if the investment funded by debt generates a higher return than the cost of the debt, the excess return benefits the equity shareholders.