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3 years ago

Give an example of financial leverage, define it and explain how financial leverage works

1 answer:

7 0

Example: A company spends $5 million to buy prime real estate on which to build a new manufacturing factory. The land is worth $5 million. This is not financial leverage because the corporation is not using borrowed funds to purchase the land.
If the same corporation spent $2.5 million of its own money and $2.5 million in borrowed funds to purchase the same piece of real estate, the company is utilizing financial leverage.

Define: the utilization of fixed expenditures to increase the expected risk and potential return

Explanation: When purchasing assets, the corporation has three alternatives for financing: stock, debt, and leases. Apart from equity, the remaining choices have fixed costs that are lower than the expected income from the asset.

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Your portfolio is comprised of 30 percent of stock X, 25 percent of stock Y, and 45 percent of stock Z. Stock X has a beta of 1.

Evgesh-ka [11]

Answer:

The beta of your portfolio is 0.9045

Explanation:

Hope this help :D

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4 years ago

Which loan type requires you to make loan payments while you’re attending school?

allsm [11]

Student Loans is the correct answer

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3 years ago

Smith plumbing supply has completed a swot analysis. the company is in a good position financially and has decided to use some o

Oliga [24]

<span>This is a growth strategy. The company, since it is in a good financial position, does not need to take a stability track to maintain its standing. Taking advantage of the opportunities they have found will give Smith Plumbing the ability to grow and become a more profitable business.</span>

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3 years ago

Read 2 more answers

Suppose that Bob places a value of $10 on a movie ticket and that Lisa places a value of $7 on a movie ticket. In addition, supp

Alex_Xolod [135]

Answer:

Explanation:

We can use the simple consumer surplus formula:

Consumer surplus = Maximum Price Willing to Pay - Actual Price

For Bob

Consumer Surplus = $10 - $8

= $2

For Lisa

Consumer Surplus = $7-8

= $-1

So, the total consumer surplus is $1

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4 years ago

jennifer has the transactions below, what is the combined impact on her net worth when considering all of the transactions? She

slamgirl [31]

Answer:

1. No effect

2. Outflow of cash

3. No effect

So, by $6,000, the net worth would decrease.

Explanation:

1. In the first situation, she purchases $5,000 worth of a mutual fund with cash which means it affects both the asset and the liability. So, the net impact would be zero.

2. In the second situation, she spends $6,000 on a two-week vacation which means it withdrew money that represents an outflow of cash.

3. In the third situation, again it affects both the asset and the liability. So, the net impact would be zero.

So, the net worth would decrease by $6,000

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3 years ago