Question

What happens to the cost of funds as financial leverage increases?

विकल्प

• It declines due to increased use of cheaper debt

• It becomes the Return on Investment

• It increases due to increased use of cheaper debt

• It becomes the repayment of principal

Answer 1

As financial leverage increases, the cost of funds declines due to increased use of cheaper debt. Debt's lower cost is associated with tax-deductible interest.