Asked by joseph sciotto on Apr 25, 2024
Trading on the equity (leverage) refers to the
A) amount of working capital.
B) amount of capital provided by owners.
C) use of borrowed money to increase the return to owners.
D) number of times interest is earned.
Equity (Leverage)
The amount of funds contributed by owners (shareholders) plus the retained earnings (or losses). It can also refer to the use of debt to acquire additional assets.
Borrowed Money
Funds that an individual or entity obtains from another party under the condition of future repayment with interest, which can be used for various purposes.
- Understand the concept of leverage (trading on equity) and its impact on shareholder returns.
Learning Objectives
- Understand the concept of leverage (trading on equity) and its impact on shareholder returns.