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FRM Financial Risk Manager Practice Test

Category - Terms and concepts

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WePro Ltd. is considered to be highly leveraged. What does “highly leveraged” refer to in the company situation?

WePro Ltd. has significantly more debt than its equity.
WePro Ltd. Breaks even in sales.
WePro Ltd. has made huge profit.
WePro Ltd. is facing bankruptcy.

Explanation

WePro Ltd. is considered to be highly leveraged, which means that it has significantly more debt than its equity.

Key Takeaway: Leverage refers to the use of debt to supplement investment. WePro Ltd. can leverage to increase returns to stock, as this practice can maximize gains. However, it has to be careful not to become highly leveraged.

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FRM Financial Risk Manager Practice Test

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FRM Financial Risk Manager Practice Test

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