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Financial leverage is the use of debt to increase earnings. 1-true 2- false?

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تم إضافة السؤال من قبل مستخدم محذوف‎
تاريخ النشر: 2013/06/29
Dunya Zaib FCMA
من قبل Dunya Zaib FCMA , General Manager Strategy , National Aquaculture Group

1.
True.

Naveed Abbas Rana
من قبل Naveed Abbas Rana , Accountant/ Consultant , Aboriginal Peoples Television Network

1-true

Habibullah Usman
من قبل Habibullah Usman , General Manager , Venkys Italy Marmo S.r.l.

True.
The ultimate aim of financial leverage by using debt is to increase earnings of any business.
This can be through capex, acquiring assets, equity investments, etc..

Idrees Zafar
من قبل Idrees Zafar , Senior Financial Analyst , Bayt.com

True

Mohammad Al-Shayeb
من قبل Mohammad Al-Shayeb , Finance Manager , Syriatel

One of the targets from the financial leverage is increasing the earnings.
Whereas the interest paid to the creditors is tax deductable.
But there are other targets from the financial leverage, such as acquiring additional assets, or restructuring the company's debts.

Muhammad Afaq
من قبل Muhammad Afaq , SENIOR FINANCIAL ACCOUNTANT , United Eddy Company (United Yousef M. Naghi Group)

1 true here i perceived earnings as equity turnover.
The firm can increase the its equity turnover by keeping higher proportion of debt in capital structure.
Following ratio can be used to measure the financial measure Financial Measure = Total Assets/Common Equity But higher degree of financial leverage increases the financial risk of the firm.

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