Which of the Following Is True About Financial Leverage

Multiple Choice

Which of the following is true about financial leverage?

A) Financial leverage boosts the rate of return for the creditors of the firm.
B) Financial leverage can increase the rate of return on owners' equity when the rate of return on invested assets is greater than the interest rate paid to creditors.
C) Financial leverage is created when there is no debt and the rate of return is increased with an increase in sales.
D) Financial leverage increases sales by increasing the amount invested in plant and equipment rather than financial assets such as bonds and stock.