Financial Leverage: Corporate Borrowing & Homemade Leverage


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question 1 of 3

Which of the following statements is true of leverage?

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1. How can companies increase their leverage by raising funds?

2. Which of the following is true with regard to the earnings per share of a company that issues a bond?

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About This Quiz & Worksheet

What are the effects of financial leverage? You can assess your knowledge of these effects and the concept of homemade leverage by using the quiz and corresponding worksheet.

Quiz & Worksheet Goals

Using these materials helps you gauge your knowledge of:

  • Why a company would raise funds through bonds instead of spending cash
  • What leverage can result in
  • The earnings per share of a company that issues a bond
  • How companies can increase their leverage through raising funds
  • Characteristics of homemade leverage

Skills Practiced

  • Information recall - access the knowledge you have gained about what leverage can result in
  • Reading comprehension - ensure that you draw the most important information from the lesson on the effects of financial leverage
  • Interpreting information - verify that you can read information about characteristics of homemade leverage and interpret them correctly

Additional Learning

Gain more insights about these financial effects by using the lesson titled Financial Leverage: Corporate Borrowing & Homemade Leverage. You can use this lesson to:

  • Define leverage
  • Determine what EPS stands for
  • Examine the risks of borrowing money for companies