True or False? An advantage of debt financing is that it decreases financial leverage.
True or False?
An advantage of debt financing is that it decreases financial leverage.
Homework Answers
False,
Financial leverage occurs due to return on total asset differs cost of debt. If rate of debt is 10% and return on total asset is 15% in such case financial leverage will occur. If there would not be debt proportion in total asset no financial leverage will occur.
Hence, debt financing would not decrease financial leverage. It would increase financial leverage as much debt portion contributed to total asset.
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True or False?
An advantage of debt financing is that it decreases financial
leverage.
Explain how debt financing (financial leverage) could improve the value of the firm. Explain why too...
Explain how debt financing (financial leverage) could improve the value of the firm. Explain why too much financial leverage might hurt the value of the firm.
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True or False
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True or False
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