Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

7. Receivables and Investments

Introduction to Investments in Securities

Financial Accounting

7. Receivables and Investments

Introduction to Investments in Securities

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Multiple Choice

Raising needed funds through borrowing to increase a firm's rate of return is called:

Asset allocation

Equity financing

Financial leverage

Dividend reinvestment

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Verified step by step guidance

Understand the concept of financial leverage: Financial leverage refers to the use of borrowed funds to finance investments with the goal of increasing the rate of return on equity. It is a strategy used by firms to amplify potential returns, but it also increases risk.

Differentiate financial leverage from other terms: Asset allocation involves distributing investments across various asset classes to balance risk and return. Equity financing refers to raising capital by selling shares of stock. Dividend reinvestment involves using dividends to purchase additional shares of stock rather than taking them as cash.

Recognize the relationship between borrowing and financial leverage: Borrowing funds allows a firm to invest in assets or projects without using its own equity, potentially increasing the return on equity if the investment generates higher returns than the cost of borrowing.

Identify the correct term in the context of the problem: The problem specifically mentions raising funds through borrowing to increase a firm's rate of return, which aligns with the definition of financial leverage.

Conclude that financial leverage is the correct answer based on the explanation and comparison with other terms provided in the problem.