{"id":55367,"date":"2024-04-16T00:26:10","date_gmt":"2024-04-16T00:26:10","guid":{"rendered":"https:\/\/exam.pscnotes.com\/mcq\/?p=55367"},"modified":"2024-04-16T00:26:10","modified_gmt":"2024-04-16T00:26:10","slug":"a-firm-will-have-favourable-leverage-if-its-_____-are-more-than-the-debt-cost","status":"publish","type":"post","link":"https:\/\/exam.pscnotes.com\/mcq\/a-firm-will-have-favourable-leverage-if-its-_____-are-more-than-the-debt-cost\/","title":{"rendered":"A firm will have favourable leverage if its _____ are more than the debt cost"},"content":{"rendered":"<p>\r\n    <!-- Check if it's an AMP page -->\r\n            <!-- Non-AMP version -->\r\n        <div class=\"mcq-container\" data-quiz-id=\"quizState_6a973b4e1ccdf\">\r\n                                            <div class=\"option\" data-option-key=\"option1\" data-is-correct=\"false\">\r\n                    debt                <\/div>\r\n                                            <div class=\"option\" data-option-key=\"option2\" data-is-correct=\"false\">\r\n                    interest                <\/div>\r\n                                            <div class=\"option\" data-option-key=\"option3\" data-is-correct=\"true\">\r\n                    equity                <\/div>\r\n                                            <div class=\"option\" data-option-key=\"option4\" data-is-correct=\"false\">\r\n                    earnings                <\/div>\r\n                            \r\n            <!-- Feedback messages for non-AMP -->\r\n            <div class=\"feedback\" data-feedback=\"wrong\">Answer is Right!<\/div>\r\n            <div class=\"feedback\" data-feedback=\"right\">Answer is Wrong!<\/div>\r\n        <\/div>\r\n\r\n        <script>\r\n        document.addEventListener('DOMContentLoaded', function () {\r\n            var containers = document.querySelectorAll('.mcq-container');\r\n\r\n            containers.forEach(function(container) {\r\n                var options = container.querySelectorAll('.option');\r\n                var feedbackSelect = container.querySelector('[data-feedback=\"select\"]');\r\n                var feedbackWrong = container.querySelector('[data-feedback=\"wrong\"]');\r\n                var feedbackRight = container.querySelector('[data-feedback=\"right\"]');\r\n\r\n                options.forEach(function(option) {\r\n                    option.addEventListener('click', function() {\r\n                        var selectedOption = option.getAttribute('data-option-key');\r\n                        var isCorrect = option.getAttribute('data-is-correct') === 'true';\r\n\r\n                        \/\/ Remove previous selections\r\n                        options.forEach(function(opt) {\r\n                            opt.classList.remove('correct', 'incorrect');\r\n                        });\r\n\r\n                        \/\/ Add the correct\/incorrect class\r\n                        if (isCorrect) {\r\n                            option.classList.add('correct');\r\n                            feedbackRight.hidden = false;\r\n                            feedbackWrong.hidden = true;\r\n                        } else {\r\n                            option.classList.add('incorrect');\r\n                            feedbackRight.hidden = true;\r\n                            feedbackWrong.hidden = false;\r\n                        }\r\n\r\n                        \/\/ Hide select feedback\r\n                        feedbackSelect.hidden = true;\r\n                    });\r\n                });\r\n            });\r\n        });\r\n        <\/script>\r\n    \r\n    <!--more--><\/p>\n<p>The correct answer is <strong>earnings<\/strong>.<\/p>\n<p>Leverage is the use of borrowed money to finance an investment. It can be used to increase the potential return on an investment, but it also increases the risk. A firm will have favorable leverage if its earnings are more than the debt cost. This means that the firm is earning more money from its investments than it is paying in interest on its debt. This can lead to a higher return on equity for the firm&#8217;s shareholders.<\/p>\n<p>Debt is the money that a firm borrows from lenders. Interest is the amount of money that a firm pays to lenders in exchange for borrowing money. Equity is the <div class=\"youtube-subscribe-container\">\r\n        <a href=\"https:\/\/www.youtube.com\/channel\/UCNHT8lW-JmLC68rjBfZhdkg?sub_confirmation=1\" target=\"_blank\" class=\"youtube-subscribe-button\">\r\n            <span class=\"youtube-icon\">\r\n                <svg xmlns=\"http:\/\/www.w3.org\/2000\/svg\" viewBox=\"0 0 576 512\">\r\n                    <path d=\"M549.7 124.1c-6.3-23.7-24.8-42.3-48.3-48.6C458.8 64 288 64 288 64S117.2 64 74.6 75.5c-23.5 6.3-42 24.9-48.3 48.6-11.4 42.9-11.4 132.3-11.4 132.3s0 89.4 11.4 132.3c6.3 23.7 24.8 41.5 48.3 47.8C117.2 448 288 448 288 448s170.8 0 213.4-11.5c23.5-6.3 42-24.2 48.3-47.8 11.4-42.9 11.4-132.3 11.4-132.3s0-89.4-11.4-132.3zm-317.5 213.5V175.2l142.7 81.2-142.7 81.2z\"\/>\r\n  <div class=\"telegram-channel-container\">\r\n        <a href=\"https:\/\/t.me\/pscnotes2025\" target=\"_blank\" class=\"telegram-channel-button\">\r\n            <span class=\"telegram-icon\">\r\n                <svg xmlns=\"http:\/\/www.w3.org\/2000\/svg\" viewBox=\"0 0 496 512\">\r\n                    <path fill=\"white\" d=\"M248,8C111,8,0,119,0,256s111,248,248,248s248-111,248-248S385,8,248,8z M362,177L320,367c-3,14-10,18-20,14l-56-41l-27,26 c-3,3-5,5-10,5l4-63L323,196c5-5-1-7-8-3l-98,62l-42-13c-9-3-10-9,2-14l162-63C351,160,365,164,362,177z\"\/>\r\n                <\/svg>\r\n            <\/span>\r\n            Join Our Telegram Channel\r\n        <\/a>\r\n    <\/div>               <\/svg>\r\n            <\/span>\r\n            Subscribe on YouTube\r\n        <\/a>\r\n    <\/div> money that a firm raises from shareholders. Earnings are the profits that a firm makes from its operations.<\/p>\n<p>If a firm&#8217;s earnings are more than its debt cost, then the firm is said to have favorable leverage. This means that the firm is earning more money from its investments than it is paying in interest on its debt. This can lead to a higher return on equity for the firm&#8217;s shareholders.<\/p>\n<p>However, it is important to note that leverage also increases risk. If a firm&#8217;s earnings decline, then the firm may not be able to make its debt payments. This could lead to bankruptcy for the firm. Therefore, it is important for firms to carefully manage their leverage in order to maximize returns while minimizing risk.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Subscribe on YouTube<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[945],"tags":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v22.2 (Yoast SEO v23.3) - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>A firm will have favourable leverage if its _____ are more than the debt cost<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/exam.pscnotes.com\/mcq\/a-firm-will-have-favourable-leverage-if-its-_____-are-more-than-the-debt-cost\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"A firm will have favourable leverage if its _____ are more than the debt cost\" \/>\n<meta property=\"og:description\" content=\"Join Our Telegram Channel Subscribe on YouTube\" \/>\n<meta property=\"og:url\" content=\"https:\/\/exam.pscnotes.com\/mcq\/a-firm-will-have-favourable-leverage-if-its-_____-are-more-than-the-debt-cost\/\" \/>\n<meta property=\"og:site_name\" content=\"MCQ and Quiz for Exams\" \/>\n<meta property=\"article:published_time\" content=\"2024-04-16T00:26:10+00:00\" \/>\n<meta name=\"author\" content=\"rawan239\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"rawan239\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"1 minute\" \/>\n<!-- \/ Yoast SEO Premium plugin. -->","yoast_head_json":{"title":"A firm will have favourable leverage if its _____ are more than the debt cost","robots":{"index":"index","follow":"follow","max-snippet":"max-snippet:-1","max-image-preview":"max-image-preview:large","max-video-preview":"max-video-preview:-1"},"canonical":"https:\/\/exam.pscnotes.com\/mcq\/a-firm-will-have-favourable-leverage-if-its-_____-are-more-than-the-debt-cost\/","og_locale":"en_US","og_type":"article","og_title":"A firm will have favourable leverage if its _____ are more than the debt cost","og_description":"Join Our Telegram Channel Subscribe on YouTube","og_url":"https:\/\/exam.pscnotes.com\/mcq\/a-firm-will-have-favourable-leverage-if-its-_____-are-more-than-the-debt-cost\/","og_site_name":"MCQ and Quiz for Exams","article_published_time":"2024-04-16T00:26:10+00:00","author":"rawan239","twitter_card":"summary_large_image","twitter_misc":{"Written by":"rawan239","Est. reading time":"1 minute"},"schema":{"@context":"https:\/\/schema.org","@graph":[{"@type":"WebPage","@id":"https:\/\/exam.pscnotes.com\/mcq\/a-firm-will-have-favourable-leverage-if-its-_____-are-more-than-the-debt-cost\/","url":"https:\/\/exam.pscnotes.com\/mcq\/a-firm-will-have-favourable-leverage-if-its-_____-are-more-than-the-debt-cost\/","name":"A firm will have favourable leverage if its _____ are more than the debt cost","isPartOf":{"@id":"https:\/\/exam.pscnotes.com\/mcq\/#website"},"datePublished":"2024-04-16T00:26:10+00:00","dateModified":"2024-04-16T00:26:10+00:00","author":{"@id":"https:\/\/exam.pscnotes.com\/mcq\/#\/schema\/person\/5807dafeb27d2ec82344d6cbd6c3d209"},"breadcrumb":{"@id":"https:\/\/exam.pscnotes.com\/mcq\/a-firm-will-have-favourable-leverage-if-its-_____-are-more-than-the-debt-cost\/#breadcrumb"},"inLanguage":"en-US","potentialAction":[{"@type":"ReadAction","target":["https:\/\/exam.pscnotes.com\/mcq\/a-firm-will-have-favourable-leverage-if-its-_____-are-more-than-the-debt-cost\/"]}]},{"@type":"BreadcrumbList","@id":"https:\/\/exam.pscnotes.com\/mcq\/a-firm-will-have-favourable-leverage-if-its-_____-are-more-than-the-debt-cost\/#breadcrumb","itemListElement":[{"@type":"ListItem","position":1,"name":"Home","item":"https:\/\/exam.pscnotes.com\/mcq\/"},{"@type":"ListItem","position":2,"name":"Financial management","item":"https:\/\/exam.pscnotes.com\/mcq\/category\/financial-management\/"},{"@type":"ListItem","position":3,"name":"A firm will have favourable leverage if its _____ are more than the debt cost"}]},{"@type":"WebSite","@id":"https:\/\/exam.pscnotes.com\/mcq\/#website","url":"https:\/\/exam.pscnotes.com\/mcq\/","name":"MCQ and Quiz for Exams","description":"","potentialAction":[{"@type":"SearchAction","target":{"@type":"EntryPoint","urlTemplate":"https:\/\/exam.pscnotes.com\/mcq\/?s={search_term_string}"},"query-input":"required name=search_term_string"}],"inLanguage":"en-US"},{"@type":"Person","@id":"https:\/\/exam.pscnotes.com\/mcq\/#\/schema\/person\/5807dafeb27d2ec82344d6cbd6c3d209","name":"rawan239","image":{"@type":"ImageObject","inLanguage":"en-US","@id":"https:\/\/exam.pscnotes.com\/mcq\/#\/schema\/person\/image\/","url":"https:\/\/secure.gravatar.com\/avatar\/d97f17072bfa490596c8f78363955d55?s=96&d=mm&r=g","contentUrl":"https:\/\/secure.gravatar.com\/avatar\/d97f17072bfa490596c8f78363955d55?s=96&d=mm&r=g","caption":"rawan239"},"sameAs":["https:\/\/exam.pscnotes.com"],"url":"https:\/\/exam.pscnotes.com\/mcq\/author\/rawan239\/"}]}},"amp_enabled":true,"_links":{"self":[{"href":"https:\/\/exam.pscnotes.com\/mcq\/wp-json\/wp\/v2\/posts\/55367"}],"collection":[{"href":"https:\/\/exam.pscnotes.com\/mcq\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/exam.pscnotes.com\/mcq\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/exam.pscnotes.com\/mcq\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/exam.pscnotes.com\/mcq\/wp-json\/wp\/v2\/comments?post=55367"}],"version-history":[{"count":0,"href":"https:\/\/exam.pscnotes.com\/mcq\/wp-json\/wp\/v2\/posts\/55367\/revisions"}],"wp:attachment":[{"href":"https:\/\/exam.pscnotes.com\/mcq\/wp-json\/wp\/v2\/media?parent=55367"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/exam.pscnotes.com\/mcq\/wp-json\/wp\/v2\/categories?post=55367"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/exam.pscnotes.com\/mcq\/wp-json\/wp\/v2\/tags?post=55367"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}