The more debt used, the greater the leverage a company employs on behalf of its owners.
<h3>
What is financial leverage?</h3>
Financial leverage exists as the usage of borrowed money (debt) to finance the purchase of assets with the anticipation that the income or capital gain from the new asset will surpass the cost of borrowing.
<h3>What is financial leverage example?</h3>
An example of financial leverage use contains utilizing debt to buy a house, borrowing money from the bank to begin a store, and bonds issued by companies.
Debt exists as an obligation that requires one party, the debtor, to pay money or other agreed-upon value to another group, the creditor. Debt stands for deferred payment, or sequence of payments, which distinguishes it from an immediate purchase.
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Answer:
Supplier sells the goods at various prices, depending on how much consumers want it, and at the rate that the goods are being sold.
For example, now, during the pandemic, face masks are now in very very high demand. Due to this, suppliers has now increased the price of the face masks, as to take advantage of the current situation
Answer:
The correct option is A,the fourth quarter budgeted revenue is $32500 as shown below.
Explanation:
The budgeted sales quantity for fourth quarter is 1300 units at $25 each.
From Economics equation of revenue equals price multiplied by quantity, the revenue for the fourth quarter is calculated below.
Revenue=P*Q
P=price=$25
Q=budgeted quantity=1300 units
Revenue=$25*1300
Revenue=$32500
The value of this revenue that would be collected in the same quarter is 75%*$32500 is $24375 while the balance of $8125 in the first quarter of the succeeding year.
This way cash flow planning in terms of matching capital payments with cash receipt is better enhanced.
Answer:
The un levered beta ( bu) of the company is 1.52
Explanation:
Given information -
Equity (E) - $20 million
Debt (D) - $5 million
Beta ( levered ) - 1.75
Tax rate ( T ) = 40%
D / E ( Debt to Equity ratio ) = $ 5 million / $20 million = .25
Formula for taking out un levered beta ( bu) is -
Beta levered ( bl ) = Beta un levered ( bu ) [1 + (1 - T ) D / E ]
1.75 = bu [1 + (1 - 40% ) .25
1.75 = bu [1 + .6 x .25 ]
1.75 = bu [ 1 + .15 ]
1.75 = bu [ 1.15 ]
bu = 1.75 / 1.15
bu = 1.52
