What is favorable financial leverage.
Favorable financial leverage is the usage of debt in a firms capital structure such that it maximises the firm value. The usage of debt increases the risk of a firm due to the statutory obligation of making the interest payment even during a downturn. However, an optimal use of debt has its advantages in the form of interest tax deductibility. Hence the debt is used in such a way that there is no higher risk of default and at the same time provides the tax benefits.
what is meant by financial leverage? How does financial leverage influence the level of financial risk?
What is meant by the term leverage? How are operating leverage, financial leverage, and total leverage related to the income statement?
2. What is operating leverage? How, if at all, is it similar to financial leverage? If a firm has high operating leverage would you expect it to have high or low financial leverage? Explain your reasoning. Please also add to your answer an example of where an HR manager may use operating leverage to his or her advantage.
We calculate financial leverage as follows. Financial Leverage =Total Asset/ Equity Financial Leverage = Total Assets/Share Holders Equity Which one is correct or most acceptable?
What is financial Leverage; explain with an example how leverage creates larger returns in both directions.
reflects last year’s operations:Sales $18,000,000Variable costs 7,000,000Revenue before fixed costs $11,000,000Fixed costs 6,000,000EBIT $5,000,000Interest expense 1,750,000Earnings before taxes (EBT) $3,250,000Taxes 1,250,000Net income $2,000,000REQUIRED:1. At this level of output, what is the degree of operating leverage?2. What is the degree of financial leverage?3. What is the degree of combined leverage?4. If sales increase by 15%, by what percent would EBT (and net income) increase?5. What is your firm’s break-even point in sales dollars?
What factors would cause a difference in the use of financial leverage for a utility company and an automobile company? Also, please discuss the limitations of financial leverage.
Explain which factors determine operative leverage and financial leverage.
What is Current Ration, Leverage, and Inventory turnover in companies financial report?
What does it mean when the financial leverage of the company goes up? Is it good or bad for the company?