--%>

Describe financial leverage and low operating leverage

Describe briefly high financial leverage, low operating leverage?

E

Expert

Verified

Whenever financial leverage is high than fund is receives mainly through the preference shares, debts and debentures. This creates the base solid by keeping the operating leverage low on scale. The financial decision can be exploited as the management's disquiet can be earning per share that will favor the debt capital only. This will rise when the rate of interest on debentures is lower than rate of return in business. The decision is depended on earning per share devoid of any indication of the risks involved.

   Related Questions in Business Economics

  • Q : The economies of Japan and US Question:

    Question: What can we learn from the Japanese experience? Is the US headed for a 'lost decade? Answer: There was

  • Q : Explain the Trade pattern of U.S. and

    Explain the Trade pattern of U.S. and World Trade?

  • Q : Comparison between EVA and Ratio

    Comparison between EVA and Ratio Analysis: EVA helps in measuring the economic performance of the company. It is the profit earned by the firm less the cost of financing the firm’s capital. It shows that the shareholders gain when the return fro

  • Q : When Economic efficiency is present

    Economic efficiency is present while the: (w) economic system is a pure socialist system. (x) resources obtainable are slightly wasted. (y) value of output is maximized, specified restricted resources. (z) utilization of resources is minimized. <

  • Q : Meaning of Modigliani-Miller Briefly

    Briefly describe the meaning of Modigliani- Miller (M and M) approach?

  • Q : Comparative advantage in production I

    I have a problem in economics on Comparative advantage in production. Please help me in the following question. The oranges are grown in Florida and potatoes are grown in Maine mainly since: (i) orange-grower’s in Maine have not lobbied effectiv

  • Q : Distinguish between the resource market

    Distinguish between the resource market and product market in the circular flow model.  In what way are businesses and households both sellers and buyers in this model?  What are the flows in the circular flow model?

  • Q : Firm costs and revenues Question:  You

    Question:  You are given the following data about two firms: FIRM A Quantity 0

  • Q : Illustrate the 3rd the government

    Illustrate the 3rd the government redistributes income?

  • Q : Facts serve to sort out good and bad

    Explain the statement: “Facts serve to sort out good and bad hypotheses.”?