--%>

Describe the financial leverage effect and its cause

Describe the financial leverage effect and what causes it? Explain the potential benefits and negative consequences of high financial leverage?
Financial leverage is the additional volatility of overall income caused through the presence of fixed-cost funds. The potential benefits are that if operating income is increasing net income will rise more quickly. The negative side is that if operating income is falling overall income will fall more rapidly, by including possibly negative values.

   Related Questions in Finance Basics

  • Q : Depict the slope of the line Normal 0

    Normal 0 false false

  • Q : Why is replacement value of assets

    Why is the replacement value of assets method not used generally to value complete businesses?The replacement value of assets method is not frequently applied to complete business valuations since it is frequently very hard to locate similar ass

  • Q : Define Non-add Non-add : Refers to the

    Non-add: Refers to the numerical value which is displayed in parentheses for informational purposes however is not comprised in computing totals, generally as the amounts are by now accounted for in the budget system or display.

  • Q : Make mutual and stockholder-owned

    Compare and make mutual and stockholder-owned savings and associations of loan. Some savings and loan associations are owned through stockholders, just as commercial banks and other corporations are owned through their stockholders.  Other

  • Q : Define Legislative Counsel Digest

    Legislative Counsel Digest: The summary of what a legislative measure does contrasting the existing law and the proposed change. This summary emerges on the first page of the bill.

  • Q : What is FERA FERA stands for The

    FERA stands for The Federal Emergency Relief Administration. The program was renamed as a direct relief operation in Roosevelt Administration. It was a form of an unemployment insurance.

  • Q : Describe Section 28.00 Section 28.00 :

    Section 28.00: It is a Control Section of Budget Act which authorizes the Director of Finance to support the augmentation or diminution of items of expenditure for the receipt of un-anticipated federal funds or other non-state funds, and which identif

  • Q : Market share of large bank holding

    Have the large bank holding companies enhanced their market share at the cost of smaller institutions?No. A study conducted through the Federal Reserve Bank of New York reveals that the increase in the concentration of assets is primarily becaus

  • Q : What do you mean by Without Regard To

    What do you mean by Without Regard To Fiscal Year (WRTFY): Where an appropriation has no period of restriction on its accessibility.

  • Q : What is Cash Flow Statement What is

    What is Cash Flow Statement: It is a statement of cash receipts and disbursements for a particular time period.