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What Is Leverage?

What Is Leverage?


Financial decision is one of the integral and important parts of financial management in any kind of business concern. A sound financial decision must consider the board coverage of the financial mix (Capital Structure), total amount of capital (capitalization) and cost of capital (Ko).

[Post Image Courtesy of StockImages at FreeDigitalPhotos.net]

Capital structure is one of the significant things for the management, since it influences the debt equity mix of the business concern, which affects the shareholder’s return and risk.

Hence, deciding the debt-equity mix plays a major role in the part of the value of the company and market value of the shares. The debt equity mix of the company can be examined with the help of leverage.

The concept of leverage is discussed in this part. Types and effects of leverage is discussed in the part of EBIT and EPS.

About Author Mohamed Abu 'l-Gharaniq

when an unknown printer took a galley of type and scrambled it to make a type specimen book. It has survived not only five centuries.

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