Question

when is financial leverage favourable .​

Answer 1

Answer:

Financial leverage refers to proportion of debt in overall capital. It is said to be favorable situation when the return on investment becomes higher than cost of debt. ROI becomes greater, EPS also increases and financial leverage is said to be favorable.

Explanation:

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Answer 2

Answer:

• When return on investment exceeds the rate of interest, the financial leverage is favourable or the firm is said to be trading on equity.
• If the financial leverage is favourable, its advantage is passed on equity stockholders in terms of higher returns.