Financial leverage refers to:

Leverage in finance refers to the use of borrowed capital to increase the potential return of an investment. Specifically, Financial leverage is defined as the extent to which a company uses debt in its capital structure. The correct answer is Use of debt. By employing debt, a company aims to magnify the returns to its shareholders, but it also increases financial risk due to fixed interest payment obligations.

• Use of equity refers to ownership financing, not leverage.
• Use of assets is a broad term; operational leverage relates to the use of fixed assets.
• Use of cash pertains to liquidity management and operational spending.

These alternatives do not accurately describe financial leverage, which is fundamentally about the debt-equity mix.