The borrowing that allows a company to purchase more assets than its stockholders are able to pay for is known as "Leverage".

Here's a step-by-step explanation:

1. A company may want to expand its operations or make large purchases, but it may not have enough funding from its stockholders (equity financing).

2. To obtain the necessary funds, the company can borrow money, which is known as debt financing. This can be done through loans, bonds, or other forms of debt.

3. The use of borrowed money to increase the potential return of an investment is known as "leverage".

4. When a company is "leveraged", it means that it has more debt than equity.

5. If the company's investment turns out to be profitable, the return to the stockholders is greater than it would have been without the borrowed money.

6. However, if the investment is not profitable, the company will still have to pay back the debt, which can lead to financial risk.

So, leverage allows a company to purchase more assets than its stockholders are able to pay for, but it also comes with increased risk.

Question

The borrowing that allows a company to purchase more assets than its stockholders are able to pay for is known as "Leverage".

Here's a step-by-step explanation:

1. A company may want to expand its operations or make large purchases, but it may not have enough funding from its stockholders (equity financing).

2. To obtain the necessary funds, the company can borrow money, which is known as debt financing. This can be done through loans, bonds, or other forms of debt.

3. The use of borrowed money to increase the potential return of an investment is known as "leverage".

4. When a company is "leveraged", it means that it has more debt than equity.

5. If the company's investment turns out to be profitable, the return to the stockholders is greater than it would have been without the borrowed money.

6. However, if the investment is not profitable, the company will still have to pay back the debt, which can lead to financial risk.

So, leverage allows a company to purchase more assets than its stockholders are able to pay for, but it also comes with increased risk.

Knowee AI · Accepted Answer

The borrowing that allows a company to purchase more assets than its stockholders are able to pay for is known as "Leverage".

Here's a step-by-step explanation:

1. A company may want to expand its operations or make large purchases, but it may not have enough funding from its stockholders (equity financing).

2. To obtain the necessary funds, the company can borrow money, which is known as debt financing. This can be done through loans, bonds, or other forms of debt.

3. The use of borrowed money to increase the potential return of an investment is known as "leverage".

4. When a company is "leveraged", it means that it has more debt than equity.

5. If the company's investment turns out to be profitable, the return to the stockholders is greater than it would have been without the borrowed money.

6. However, if the investment is not profitable, the company will still have to pay back the debt, which can lead to financial risk.

So, leverage allows a company to purchase more assets than its stockholders are able to pay for, but it also comes with increased risk.

orrowing that allows a company to purchase more assets than its stockholders are able to pay for is

Question

Borrowing that allows a company to purchase more assets than its stockholders are able to pay for is

Solution

Similar Questions

Upgrade your grade with Knowee