--%>
Assignment Help - homework help

What does financial leverage specify

What does financial leverage specify? And also states its limitations?

E

Expert

Verified

Financial leverage specifies borrow of funds to increase the capital through issuing shares in the market to meet their business requirements. This as well indicates the profitability and return on equity of the company that has taken important amounts of debt. The financial leverage has numerous benefits but it possesses some limitations additionally which has been illustrated below:-

1) If a company borrows funds employing financial leverage then this money develops an environment which can either creates lots of profits or a little amount of it.

2) Borrowing continuously creates an image that the company may be on high risk. Which in turn raises the interest rates and some restrictions might be handed over to the borrowing organization.

3) Value of stock as well gets influenced as it can drop substantially if the stockholders intrude in between.

   Related Questions in Business Economics

  • Q : Define the Legal forms of businesses

    Define the Legal forms of businesses?

    		•
  • Q : What are the facts of inflation What

    What are the facts of inflation?

    		•
  • Q : Define the term Abstractions in

    Define the term Abstractions in economics?

    		•
  • Q : Explanation of theory of pricing for

    The theory of pricing for particular goods explained in Adam Smith’s Wealth of Nations is most consistent along with: (1) mercantilist doctrine. (2) Richard Cantillon’s distinction between “value in

    		•
  • Q : Speculators activities over the long-run

    Over the long-run the speculators activities are tend to: (1) decrease the volatility of prices. (2) attract legal attention and result in imprisonment. (3) increase the level and volatility of prices both. (4) yield tremendous profits and raise costs

    		•
  • Q : Technology in production Drawing a

    Drawing a production possibilities frontier needs the supposition that: (1) Decision makers encompass discretion over resource accessibility. (2) Technology is constant. (3) Income is fairly distributed. (4) Resources are considerably diverse. (5) At least three goods

    		•
  • Q : Market efficiency while transaction

    Transaction costs tend to be decreased and markets are more efficient when: (w) the government subsidizes a good. (x) inter-market price differentials are eliminated through arbitrage. (y) taxes are used to give for social wants. (z) regulations close

    		•
  • Q : Who define economics as a subset of

    Economists who viewed economics like a subset of jurisprudence combined: (1) John Stuart Mill. (2) Alfred Marshall. (3) Karl Marx. (4) William Stanley Jevons. (5) Adam Smith. Hey friends please give your opinion fo

    		•
  • Q : Organization of employees-Division of

    ‘Mama’ Jean consists of one employee bake crumbly, graham cracker crusts at Mama’s Home-Pies, whereas the other stirs gooey, hot, apple filling. Her staff is organized in accord with a/an: (1) Task management system. (2) Division of labor. (3) Compar

    		•
  • Q : Discuss the economic aspects of ticket

    Discuss the economic aspects of ticket scalping also identifying the gainers and losers?

    		•