Introduction of the term Financial Leverage
Give a brief introduction of the term Financial Leverage?
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It is a leverage that refers to high level of profitability due to high fixed financial expenditures. It consists of preference dividend and interest on loan. Higher financial leverage points out higher financial risk and higher break points. In this category the managers have flexibility in the choice of capital structure.
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Opportunity Cost:Whenever you select a particular alternative, the next best alternative should be given up. For illustration, when you desire to watch cricket highlights in T.V., you should
Problem: Luke likes to consumer CDs (good1) and pizzas (good 2). His preference over both goods is given by the utility function U(x1; x2) = x21
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