Which of the following statements is most accurate? A. Financial leverage is directly related to operating leverage. B. Increasing the corporate tax rate will not affect capital structure decisions. C. A firm with low operating leverage has a small proportion of its total costs in fixed costs. D. Total costs can be calculated as net income minus total revenue
Cost of Debt, Cost of Preferred Stock
This article deals with the estimation of the value of capital and its components. we'll find out how to estimate the value of debt, the value of preferred shares , and therefore the cost of common shares . we will also determine the way to compute the load of every cost of the capital component then they're going to estimate the general cost of capital. The cost of capital refers to the return rate that an organization gives to its investors. If an organization doesn’t provide enough return, economic process will decrease the costs of their stock and bonds to revive the balance. A firm’s long-run and short-run financial decisions are linked to every other by the assistance of the firm’s cost of capital.
Cost of Common Stock
Common stock is a type of security/instrument issued to Equity shareholders of the Company. These are commonly known as equity shares in India. It is also called ‘Common equity
Which of the following statements is most accurate?
Financial leverage is directly related to operating leverage.
Increasing the corporate tax rate will not affect capital structure decisions.
A firm with low operating leverage has a small proportion of its total costs in fixed costs.
Total costs can be calculated as net income minus total revenue.
Operating leverage refers to the degree to which a company's operating income or earnings before interest and taxes (EBIT) change in response to changes in its sales revenue. In other words, it measures how sensitive a company's profits are to changes in its sales volume.
Financial leverage, also known as leverage or gearing, refers to the use of borrowed funds (debt) to finance the acquisition of assets or investments with the aim of increasing the potential return on investment. It involves using debt to magnify the potential gains or losses of an investment. Financial leverage can be used by individuals, companies, and even governments to achieve different financial goals.
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