Below are statements regarding the relationships between various concepts discussed in this module, including:

• Return on equity
• Return on assets
• Financial leverage
• Cost of capital (or the weighted average cost of capital)
• Business strategy.

Select those that are TRUE.

Select one or more:

a. If a business increases its financial leverage, this will magnify any returns (or losses) generated for every dollar tied up on assets.

b. When businesses establish a strategy (focus, differentiating, or lowest-cost), it commits to a particular combination of the profit margin (low vs. high) and asset turnover (high vs. low volume) for maximizing return on assets.

c. Value is created when the assets employed in a firm's operations generate returns greater than the cost of capital.

d. If a business takes on more debt (e.g., selling bonds) to finance the purchase of tangible assets or the creation of intangible assets (e.g., investing in training and development), it increases its financial leverage.

e. Utilizing shareholders' equity increases financial leverage