--%>
Assignment Help - homework help

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 : None what are the disadvantages of

    what are the disadvantages of working capital

    		•
  • Q : Describe relationship among a bonds

    Describe relationship among a bond's market price and its promised yield to maturity? Describe.A bond's market price based on its yield to maturity (YTM). While a bond has YTM greater than its coupon rate, it sells at discount from its face va

    		•
  • Q : How do mergers influence consumers How

    How do mergers influence consumers?The effects mergers have on consumers differ widely. There may be some inconvenience and anxiety while a customer's bank or branch is obtained. The issuance of new account numbers and new checks is a familiar h

    		•
  • Q : Describe free cash flows Describe "free

    Describe "free cash flows?" It represents the total cash flows from business operations which are obtainable to be distributed to the suppliers of a firm's capital each year either within the form of interest to the debt holders, or dividends to

    		•
  • Q : Which ratios would banker is interested

    Which ratios would banker is most interested while assuming whether to approve an application for short-term business loan? Illustrate.Bankers and other lenders employ liquidity ratios to distinguish whether to extend short-term credit to a firm

    		•
  • Q : Legal factors to restrict a corporation

    Are there any legal factors which could restrict a corporation in its attempt to pay cash dividends to common stockholders? Describe. A firm may be legally limited as to the dividends it can pay through existing bond indentures or loan agreemen

    		•
  • Q : Effect of change on equilibrium

    Normal 0 false false

  • Q : Crowding out influence Normal 0 false

    Normal 0 false false

  • Q : What is Legislative Analysts Office

    Legislative Analyst’s Office (LAO): A non-partisan organization which gives advice to the Legislature on the fiscal and policy matters. For illustration, the LAO annually publishes a full analysis of the Governor's Budget and this document becom

    		•
  • 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.

    		•