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When a firm has financial leverage ROI will be greater than ROE?
Wiki User
∙ 11y ago
ROI will be greater than ROE.
Wiki User
∙ 11y ago
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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 0.3 greater than or less than 0.08?
0.3 is greater than 0.08
Is 0.4 greater or less than 0.08?
0.4 is greater than 0.08
When a firm has financial leverage roi is greater than or less than roe?
ROI will be greater than ROE.
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.
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.
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.
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.
What can happen if the MRP is greater than a firm's MC?
The firm can afford to hire more workers.
How do you increase financial leverage of a company?
make certain that the companies assets continues to be proportionally larger than the companies equity
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 does a firm know when it can afford to hire more workers?
if the MRP is greater than a firms MC
How do you calculate asset leverage ratio?
This ratio is used to identify the financial leverage of the company i.e. to identify the degree to which the firm's activities are funded by the owners money versus the money borrowed from creditors.The higher a company's degree of leverage, the more the company is considered risky.Formula:Net Debt / Equity
What is the ticker symbol FAS?
this tracks the financial components of the s & p 500, but moves 3 times greater than a normal average. in other words your leverage is 3:1. this can be fantastic if the index is moving in the direction in which your money is riding, but disastrous if it moves in the opposite direction of your position.
