Which of the following terms refers to the use of debt financing?
Correct answer: B. Financial Leverage
- A. Operating Leverage
- B. Financial Leverage
- C. Manufacturing Leverage
- D. None of the given options
Explanation
Financial leverage refers to using debt or other fixed-financing-cost sources to fund business operations. Operating leverage instead arises from fixed operating costs such as rent and machinery.
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About Business Finance
Business finance explains how organisations plan, obtain and use money while balancing risk, return and liquidity. Topics include financial statements, time value of money, budgeting, working capital, capital structure, sources of finance, investment appraisal and cost of capital. Capital budgeting evaluates long-term projects, whereas working capital manages day-to-day operations.
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