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

Revenues, Revenues Revenues are the gross income received before any de...

Revenues Revenues are the gross income received before any deductions for discounts, expenses, returns, and so on. It is also called sales in most organization. A much less c

Exam answers, Prepare your recommendation on Agarwal Cast Company

Prepare your recommendation on Agarwal Cast Company

What is the value of the security to an investor, What is the Value of the ...

What is the Value of the security to an investor Value of the security to an investor is directly proportional to the return that he is expected to get from that security. Hig

Homework, Homework 1. Suppose you deposit $18,000 into an account today th...

Homework 1. Suppose you deposit $18,000 into an account today that earns 6% interest per year, and you do not withdraw the money for 21 years. What will be the balance in the acco

What is the meaning of deviations, What is the meaning of Deviations De...

What is the meaning of Deviations Deviations must be recorded and investigated regardless of the amount involved and then assess whether deviations are isolated departures or i

What is a sunk cost, What is a sunk cost?  Is it relevant when evaluating a...

What is a sunk cost?  Is it relevant when evaluating a proposed capital budgeting project?  Explain. A sunk cost is a cash flow that has already takes placed, or that will take

OPERATING CYCLE, Discuss the applicability of an operating in vegetable gro...

Discuss the applicability of an operating in vegetable growing business in Uganda.

Municipal securities, Municipal Securities are debt securities ...

Municipal Securities are debt securities issued by a State, Municipality or a County in order to finance its capital expenditures. These securit

Hedge against this foreign currency exposure, Question: Part A: Just...

Question: Part A: Justify and criticize the usual assumption made in Financial Management literature that the objective of a firm is to maximize the wealth of its sharehol

Can you explain dispersion method, Q. Can you explain Dispersion method? ...

Q. Can you explain Dispersion method? Dispersion method help to assert risk in receiving a return on investment. The greater the potential dispersion, the greater the risk. One

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