17 February, 07:36
Other things held constant, an increase in financial leverage will increase a firm's market (or
systematic) risk as measured by its beta coefficient.
17 February, 08:06
The formula of the degree of financial leverage is presented below
= (EBIT) : (EBIT - Interest expense)
The financial leverage represents the direct relationship between financial leverage and the firm risk or systematic risk
That means if there is an increase in financial leverage so the systematic risk is also increased while on the other hand, if there is a decrease in financial leverage so the systematic risk is also decreases
The more debt is available, the more interest is paid, and the more risk comes forward.
Know the Answer?
New Questions in Business
How to do Trigonometry
Which of the following is NOT an example of an ecological service provided by forests? Select one: a. Livestock grazing areas b. Reduction of soil erosion c. Purification of water and air d. Reduce atmospheric carbon
The value of a computer is $1200. It loses 20% of its value every year. Write a function the represents the value y (in dollars) of the computer after t years. The find the value of the computer after 5 years.
Which object has the mass of about one gram
We're the effects of industrialization more position or more negative, explain your answer and give examples. (Things to considers: affects on the social classes, working condition and living condition.)
» Other things held constant, an increase in financial leverage will increase a firm's market (or systematic) risk as measured by its beta coefficient. a. True b. False