Define the financial leverage effect, Financial Management

Assignment Help:

What is the financial leverage effect and what causes it?  What are the potential benefits and negative consequences of high financial leverage?

Financial leverage is the extra volatility of net income that is caused by the existence of fixed-cost funds. The potential advantages are that if operating income is rising net income will increase more quickly.  The unenthusiastic side is that if operating income is falling net income will fall more fast, including probably negative values.


Related Discussions:- Define the financial leverage effect

Cash flow statements, Cash flow statement: The cash flow statement summ...

Cash flow statement: The cash flow statement summarises the flow of cash into and out of the business over a certain period of time. The cash flow statement measures the liq

Market mechanism, Market mechanism: Market mechanism is a term from ec...

Market mechanism: Market mechanism is a term from economics denoting to the use of money exchanged by sellers and buyers with an open and understood system of time and value t

Valuation of shares , Example based on Valuation of Shares Share capit...

Example based on Valuation of Shares Share capital details & Types of Share Hatsun Agro private limited (HAPL) as on March 2008 had a total authorized share capital worth

Measuring interest rate risk , Investors are always interested in est...

Investors are always interested in estimating the price sensitivity of a bond to change in market interest rates. Let us study how prices change both in terms of

Operating cycle, Explain the operating cycle of a vegetable growing busines...

Explain the operating cycle of a vegetable growing business

I need urgent help in Financial Managment, How to get cost differential whe...

How to get cost differential when 100% done by a single party only.

Explain the cash flow of the volatility, 1. Let's look at the cash flow of ...

1. Let's look at the cash flow of the volatility (variance) spread swap: - ( σ 2 Nasdaq - σ 2 S & P 500 ) N 2 It is noticeable from this expression that investor

TRIAL BALANCE, #The following items are found in the The following items ar...

#The following items are found in the The following items are found in the trial balance of M/s Sharada Enterprise on 31st December, 2000.

Hedging using commodity futures, Hedging Using Commodity Futures Produc...

Hedging Using Commodity Futures Producers of agricultural commodities are faced with price risk and production risk over a period of time and within a marketing year. In case o

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd