Question

23. Higher FL is related the use of
(a) Higher Equity
(c) Lower Debt
(b) Higher Debt
(d) None of the above
axes​

Answer 1

Answer:

Financial leverage means the presence of debt in the capital structure of the company. This can also be referred as the fixed cost bearing source of fund used by the company as part of capital structure. This may includes debts , preference shares etc. The more debt financing a company uses, more is the degree of financial leverage.

Answer 2

Answer:

The answer is (b) Higher Debt.

Explanation:

Financial leverage indicates the existence of debt in the company's capital structure. This can even be referred to as the fixed cost-bearing source of funds utilized by the company as part of the capital structure. This may contain debts, preference shares, etc. The more debt financing a company uses the more exists the degree of financial leverage.

Financial leverage exists in the use of borrowed funds (debt) to finance the purchase of assets with the anticipation that the income or capital growth from the new asset will surpass the cost of borrowing.

Hence, The answer is (b) Higher Debt.