Definition of financial leverage, Financial Management

Assignment Help:

Q. Definition of financial leverage?

One of the goals of planning an appropriate capital structure is to maximize the return on equity shareholders fund or else maximize the earning per share. a number of authorities have used the term 'financial leverage' in the context that it defines the relationship between EBIT as well as EPS. As-per to the Gitman 'financial leverage' is the ability of a firm to use fixed financial charges to magnify the effects of change in EBIT on the firm's earning per share. The financial leverage so indicate the percentage change in earning per share in relation to a percentage change in EBIT. The degree of financial leverage is able to be written as follows:

Degree of financial leverage   =    Percentage change in EPS / (DFL) Percentage change in EBIT


Related Discussions:- Definition of financial leverage

Concepts of cost of capital, Concepts of Cost of Capital 1. Explicit ...

Concepts of Cost of Capital 1. Explicit Cost And Implicit Cost The explicit cost of any source of finance may be described as the discount rate that equates the current v

Stock exchange, Working and function of stock exchange

Working and function of stock exchange

List the benefits of the flexible exchange rate regime, List the benefits o...

List the benefits of the flexible exchange rate regime. Answer:  The benefits of the flexible exchange rate system include: a) Automatic attainment of balance of payments eq

Define political risk into the capital budgeting process, How would you inc...

How would you incorporate political risk into the capital budgeting process of foreign investment projects? One method is to adjust the cost of capital upward to imitate politi

Show the transaction risk, Q. Show the Transaction risk? This is the ri...

Q. Show the Transaction risk? This is the risk occur on short-term foreign currency transactions that the actual income or cost may be different from the income or cost expecte

Major risk return decision areas, Q. Major Risk Return Decision Areas? ...

Q. Major Risk Return Decision Areas? 1) Financial Analysis and Control: This area is concerned with the Financial Statements, i.e. Income Statement, Balance Sheet, Funds Flow S

FINA310-1203B-10 Financial Management, FINA310-1203B-10 Financial Managemen...

FINA310-1203B-10 Financial Management Assignment Name: Unit 2 Discussion Board Deliverable Length: 3-5 paragraphs Details: The Discussion Board (DB) is part of the core of online l

Define the implications of the interest rate parity, Discuss the implicatio...

Discuss the implications of the interest rate parity for the exchange rate determination. Answer: Presume that the forward exchange rate is roughly an unbiased predictor of the

Bonds with embedded put options, Put option is the right of the inves...

Put option is the right of the investor which he may exercise on the date at the put price given in the indenture. Normally, put price is in par value. When yield rises

Show the working capital in a business, Q. Show the Working capital in a bu...

Q. Show the Working capital in a business? Working capital in a business is essential since of operating cycle. However the need for working capital doesn't come to an end afte

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