Question

The effect of financial leverage Blank______ for all earning levels. Multiple choice question. is variable is disadvantageous is advantageous

Answer 1

The impact of financial leverage varies across all income levels.

The use of debt to acquire extra assets or fund initiatives is known as financial leverage. Individuals or corporations borrow money to incur debt. Borrowers guarantee lenders that they will repay the principle and interest on their loans. Financial leverage is also known as leverage or equity trading.

Fundamental analysis use the degree of financial leverage (DFL) to measure the sensitivity of a company's earnings per share (EPS) to changes in profits before interest and taxes (EBIT). Whenever a corporation has a high DFL, it typically has large interest payments, which reduces EPS.

Therefore, the correct option is variable.

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