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Understanding Leverage in Finance Quiz

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1. What does 'Leverage' mean in financial context?

2. What does a higher degree of financial leverage represent for a company?

3. Which of the following is true regarding Financial Leverage?

4. If a company operates under a high degree of financial leverage, how does it affect the shareholders?

5. Which of the following ratios is used to measure the degree of financial leverage of a firm?

6. What is Operating Leverage?

7. What is one of the main benefits of using leverage?

8. Which type of leverage involves the use of borrowed funds in the expectation of achieving a higher rate of return than the interest payable for the use of the funds?

9. Which sector/industry typically has high degree of leverage?

10. Which statement is true about the impact of leverage on a firm's Return on Equity (ROE)?