Question

what is meant by the terms 'favorable' and 'unfavorable' leverage? Give examples.

Answer 1

Answer:

For example, if a company borrows Rs. 100 at 10% interest p.a., and earns a return of 12%, the leverage will be considered favourable. Unfavourable or negative leverage occurs when the firm does not earn as much as the cost of debt.

Answer 2

Here is your answer...

For example, if a company borrows Rs. 100 at 10% interest p.a., and earns a return of 12%, the leverage will be considered favourable. Unfavourable or negative leverage occurs when the firm does not earn as much as the cost of debt.

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