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3 years ago

A company investing borrowed funds expects to earn a return greater than the interest it will pay for the use of funds is using

Business

1 answer:

Naddika [18.5K]3 years ago

3 0

Answer:

Financial leverage

Explanation:

Financial leverage is defined as the use of borrowed funds to perform a business activity or investment that is expected to have higher returns than the cost of borrowing the money (interest).

When a company is looking for funds for its activities there are 3 options they can use: equity, debt, or lease.

Use of equity is the only option where no extra cost is incurred for use of funds.

When using debt or lease cost of use is incurred. The business will need to engage in an activity that will give it revenue above cost of debt.

This practice is called use of financial leverage.

You might be interested in

If a supply chain manager can reduce inventory while keeping the flow rate constant, what does little's law predict will happen

ozzi

If a supply chain manager can reduce inventory while keeping the flow rate constant, little's law predicts flow time will go down.

Little's Law is a theorem that calculates the average number of items in a stationary queuing system based on an item's average waiting time and the average number of items arriving at the system per unit of time.

The law establishes a straightforward and obvious method for evaluating the efficiency of queuing systems.

The notion is extremely important for business operations since it states that the number of items in the queuing system is determined primarily by two essential variables and is unaffected by other factors such as service distribution or service order.

Hence, the answer is that the flow time will go down.

Learn more about supply chain:

brainly.com/question/25160870

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7 0

1 year ago

How Do Earthquakes Form Will Give Brainliest

densk [106]

Answer:

Earthquakes happen when the boundaries of the Earth's tectonic plates bump and slide past one another; sometimes, they get stuck on jagged edges and cause earthquakes once they are released. These earthquakes are always followed by aftershocks starting from the same epicenter.

Explanation:

The Earth's four main layers are the inner core, outer core, mantle and crust. The crust and the mantle make up a "skin" on the outside of the planet, but is not made of a single piece. The pieces of the mantle and crust are called tectonic plates with the outer edges of each of them called plate boundaries. The section where two plates meet and move is called a fault. As each of the plate boundaries get caught on each other, the rest of the tectonic plate keeps moving and energy begins to store at the point of friction.

When the energy overcomes the friction caused, all of the energy is released and radiates from the epicenter. These waves of energy are called seismic waves and ripple like water on a pond when a stone is dropped in. They often reach the surface of the planet where everything starts to shake. This is why cities or towns that are located near faults are more likely to feel earthquakes than those in the center of a tectonic plate.

4 0

3 years ago

Using the governmental- and proprietary type funds, indicate which would be used to record each of the following events.

Alekssandra [29.7K]

Answer:

Check the following explanation

Explanation:

1. Bonds were issued by the fund used to account for providing water to the residents of a municipality.

- EF Enterprise Fund

2. The fund that finances the city’s basic day-to-day operating activities lent $50,000 to the fund that will provide city agencies with supplies on a user charge basis.

- GF General Fund and ISF Internal Service Fund

3. The city-operated utility that provides electricity to the residents of a municipality billed the city for electricity provided to city agencies.

- GF General Fund and EF Enterprise Fund

4. The city charter requires all hotel taxes to be accounted for in a separate fund dedicated to maintaining the downtown business district. Hotel tax collections for the period were $500,000.

-SRF Special Revenue Fund

5. Salaries were paid to the city’s police officers and firefighters.

- GF General Fund

6. The state lottery, which operates like a business entity, sent a check for its net revenues (after paying lottery prizes) to the state. The state will add these revenues to general state revenues as part of the state’s program for financing elementary and secondary education.

-GF General Fund and EF Enterprise Fund

7. Interest and principal on the city’s general obligation debt were paid, using resources accumulated specifically for that purpose.

-DSF Debt Service Fund

8. The fund that finances the city’s day-to-day operating activities transferred cash to the fund that pays principal and interest on outstanding debt.

-GF General Fund and DSF Debt Service Fund

9. The city sold general obligation bonds to buy land as part of a city hall expansion program.

- CPF Capital Projects Fund

10. The city’s central motor pool billed each city department for use of vehicles.

- ISF Internal Service Fund and GF General Fund

11. The state established a highway beautification program, to be financed by dedicating a new motor vehicle license fee to that purpose.

- SRF Special Revenue Fund

12. A wealthy taxpayer donated securities to a village, stipulating that the donation be kept in perpetuity and that the resulting investment income be used solely to help support the activities of the village library.

- PF Permanent Fund and SRF Special Revenue Fund

13. The state-operated toll road collected tolls of $1 million.

- EF Enterprise Fund

14. The village maintains a perpetual-care public cemetery fund. Income from that fund was transferred to the fund that accumulates resources dedicated to maintaining the cemetery.

-PF Permanent Fund and SRF Special Revenue Fund or EF Enterprise Fund

6 0

2 years ago

Mariposa is buying a car for five thousand dollars. She has two thousand dollars. What is the best way to finance the balance?

yulyashka [42]

The best way for Mariposa to finance the remaining balance on her car is installment credit. The correct answer is C.

5 0

3 years ago

You own a business which generates $200,000 in profit per year. Someone has offered to buy it from you. Based on a 5 year projec

vovangra [49]

Answer:

option (b) $777,930.25

Explanation:

Data provided in the question:

Profit per year = $200,000

Time = 5 years

Return, r = 9% = 0.09

Now,

Worth of business = ∑ (Cash flow × Present value factor)

also,

Present value factor = (1 + r )⁻ⁿ

here,

n is the year of cash flow

Thus,

Year Cash Flows Present value factor Present value of cash flow

0 0 1 0

1 200000 0.917 $183,486.24

2 200000 0.842 $168,336

3 200000 0.772 $154,436.70

4 200000 0.708 $141,685.04

5 200000 0.65 $129,986.28

Hence,

The business worth today is

= $183,486.24 + $168,336 + $154,436.70 + $141,685.04 + $129,986.28

= $777,930.25

Hence,

The answer is option (b) $777,930.25

5 0

3 years ago