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What is financial leverage

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Reference no: EM13305344

1. If you consider the debt tax shield, all the firms should have as much debt as they can, why then do we find that firms have not high levels of debt?

2. Is it true that the debt to equity ratio has no effect in the riskiness of the stock? (hint, look at the Hamada equation)

3. What is operating leverage and why would firms use it?

4. What is financial leverage?, what is its effect on the ROE and ROIC of a firm?

5. Is it true that both financial and operating leverage increase the risk of the firm's cash flow?

 

Reference no: EM13305344

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