What term is used when the rate of return exceeds the costs of borrowing?

What term is used when the rate of return exceeds the costs of borrowing?

• A. Negative
• B. Positive
• C. Neutral
• D. Zero

Answer: (B)

When the rate of return exceeds the costs of borrowing, it is termed "positive." This indicates that the investment is generating more income than what it costs to finance it, which is a desirable situation for investors and businesses. A positive return not only covers the borrowing costs but also contributes to the overall profitability of the investment. This scenario reflects good financial health and effective investment strategies, as money is being utilized efficiently to generate surplus income over expenses. In contrast, terms like negative, neutral, or zero would imply that the investment is not fulfilling its potential or is unprofitable, thus failing to create the desired financial benefit.

When the rate of return exceeds the costs of borrowing, it is termed "positive." This indicates that the investment is generating more income than what it costs to finance it, which is a desirable situation for investors and businesses. A positive return not only covers the borrowing costs but also contributes to the overall profitability of the investment. This scenario reflects good financial health and effective investment strategies, as money is being utilized efficiently to generate surplus income over expenses. In contrast, terms like negative, neutral, or zero would imply that the investment is not fulfilling its potential or is unprofitable, thus failing to create the desired financial benefit.