--%>

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 : Case study plz find the attachment and

    plz find the attachment and dont compromise on quality,, no similarity n need to be done according to requierment...

  • Q : Why businesses are not really free to

    Why businesses are not really “free” to produce what they wish?

  • Q : Divergences arise between equilibrium

    What divergences arise between equilibrium and an efficient output when spillover costs? How might government correct this divergence?

  • Q : Elucidate the use of money as a medium

    Elucidate the use of money as a medium of exchange in Market System?

  • Q : Major implication of invisible hand of

    The major implication of Adam Smith’s conception of an “invisible hand” was such that: (w) pursuit of individual self interest must be controlled. (x) most people lose sight of what’s good for society. (y) most

  • Q : Economic sense production methods

    Evaluate and explain the statements: “In the economic sense production methods are the most efficient methods, once resource prices are considered and are lesser in sense of engineering”.

  • Q : Rightward shift of PPC What was

    What was rightward shift of PPC point out? Answer: It points out growth of the resources.

  • Q : Calculating fat-tax Question: Max has a

    Question: Max has a utility function U =√ x1x2 where x1 is litres of ice-cream and x2 is boxes of strawberries. The marginal utility of a litre if ice-cream is

  • Q : Conception of the Invisible Hand by

    Conception of the “Invisible Hand” by Adam Smith relies on mechanisms like those as underpin: (1) William Stanley Jevons’ “sunspot” theory of business cycles. (2) the biological concept of Homeostasis. (3

  • Q : Favor laissez- faire economic policies

    Favor laissez- faire economic policies tended by Adam Smith, who also: (w) saw the requirement for several state intervention. (x) believed there were no conditions in which the government must intervene. (y) supported most government