Final answer:
Financial leverage refers to the magnified financial performance, specifically measured at return on equity and earnings per share, due to the use of borrowed funds.
Step-by-step explanation:
The term financial leverage originated from the notion that there is a multiplicative effect on financial performance measured by various metrics when borrowed money is used to support the firm. Specifically, the correct answer to the question is that financial leverage is measured at return on equity (b) and earnings per share (c). Both these measures can be significantly impacted by the use of borrowed funds. When a firm borrows money, it can invest that money into projects that have the potential to generate returns. If these investments do generate returns, these returns are then spread over the same amount of equity, thus potentially increasing the return on equity and earnings per share. However, if we specifically account for this aspect of leverage, return on equity is the most directly affected, as it measures the return generated on the owner's invested capital, which gets amplified by the use of borrowed funds while earnings per share might not show the immediate effects of leverage since it is also dependent on the number of shares outstanding.