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When a firm's expenses are greater than its sales revenue the firm has a?
When a firm spends more than it gains in revenue it is called a LOSS.
Is 2 miles less than or greater than 10500 feet?
greater than
Is .74 greater than or less than 0.1?
greater than
Is 7.5 greater than or less than 7.05?
7.5 is greater than 7.05 is.
Is 0.575 greater or is 0.1069 greater?
0.575 is greater than 0.1069
When a firm has financial leverage roi is greater than or less than roe?
ROI will be greater than ROE.
When a firm has financial leverage?
When a firm has financial leverage, it means that it is using borrowed funds to finance its operations and investments, with the aim of increasing returns on equity. This strategy amplifies both potential gains and losses; if the firm performs well, the returns on equity can be significantly higher than if it relied solely on equity financing. However, financial leverage also increases risk, as the firm must meet its debt obligations regardless of its financial performance. Thus, while leveraging can enhance profitability, it can also lead to greater financial instability if not managed carefully.
What does financial leverage mean in financing?
Financial leverage refers to the use of borrowed funds to amplify the potential return on investment. By using debt to finance operations or investments, a company can increase its equity returns if the investment generates higher returns than the cost of the debt. However, while financial leverage can enhance profits, it also increases risk, as it may lead to greater losses if the investments do not perform as expected. Consequently, managing financial leverage is crucial for balancing potential rewards with associated risks.
A high degree of financial leverage means?
A high degree of financial leverage means the benefits from tax-deductibility of interest(from additional debt) is more than offset by the increase in financial distress. The firm's fixed obligations are higher and the risk of a likely default is increased with a higher Debt to Equity ratio. There isn't any set out formula that sets the optimal leverage for a firm...but at some some point taking on more debt, with increases the risk anf thus the return of Equity holders further increases the risk of bondholders and creditors to the firm. Any default in payments leads to distress including bankruptcy, more financial burdens to fight off or succomb to bankruptcy, lower value of firms residual assets allocated to Equityholders and likelihood of the firm shotting down.
When a firm's expenses are greater than its sales revenue the firm has a?
When a firm spends more than it gains in revenue it is called a LOSS.
Is financial leverage positive if the interest rate on debt is lower than the return on total assets?
If a company's rate of return on total assets is ledd than the rate of return the company pays its creditors you have positive financial leverage.
What can happen if the MRP is greater than a firm's MC?
The firm can afford to hire more workers.
What should the firm do if marginal revenue is greater than marginal cost?
If a firm's marginal revenue is greater than its marginal cost, it should increase production to maximize profits.
What happens to the costs of debt and equity when leverage increases?
Key Points If value is added from financial leveraging then the associated risk will not have a negative effect.At an ideal level of financial leverage, a company's return on equity increases because the use of leverage increases stock volatility, increasing its level of risk which in turn increases returns.If earnings before interest and taxes are greater than the cost of financial leverage than the increased risk of leverage will be worthwhile. Terms solvency The state of having enough funds or liquid assets to pay all of one's debts; the state of being solvent. liquidity Availability of cash over short term: ability to service short-term debt.
If marginal revenue is greater than marginal cost the firm should?
If MR is greater than MC, the firm should increase their production. The ideal amount of production is determined by allowing the marginal cost to equal the marginal revenue.
When an organization can get optimal production?
this is obtained when a firm equates its marginal revenue to its marginal cost.At a level of output where MR exceeds MC,then the firm should increase output since the addition to revenue is greater than the addition to revenue.Where a firm's MR is less than its MC,the firm should lower its output since the addition to costs is greater than the addition to revenue.
How do you increase financial leverage of a company?
make certain that the companies assets continues to be proportionally larger than the companies equity
