Which of the following statements is true?
A. Financial leverage should not be considered when a firm borrows money.
B. Under the right circumstances, the use of borrowed money can improve a firm's return on owners' equity.
C. There is no good reason for a firm to borrow money when it has cash to finance expansion.
D. The use of borrowed money always reduces a firm's return on owners' equity.
E. Return on owners' equity is not an important financial calculation.
Answer: B
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