The ways small business owner or corporate manager use financial leverage to improve the firm’s profits and return on owners’ equity and whether there is any potential danger of using financial leverage. Introduction: Financial leverage, likewise called trading on equity, is the budgetary trade off between the return on the issuance of preferred stock or debt and the cost of maintaining that debt or preferred stock.

Question

How can a small business owner or corporate manager use financial leverage to improve the firms profits in return on owners equity

Answer 1

Question

Chapter 16, Problem 5DQ

Summary Introduction

To determine: The ways small business owner or corporate manager use financial leverage to improve the firm’s profits and return on owners’ equity and whether there is any potential danger of using financial leverage.

Introduction: Financial leverage, likewise called trading on equity, is the budgetary trade off between the return on the issuance of preferred stock or debt and the cost of maintaining that debt or preferred stock.

Expert Solution & Answer

Trending nowThis is a popular solution!

See solution

Check out sample textbook solution

Students have asked these similar questions

How can a small business owner or corporate manager use financial leverage to improve the firms profits in return on owners equity

What are the ethical considerations involved in a company's decision to loan executives’ money to cover margin calls on their purchase of shares of company stock?

What is the cheapest source of funds? When all other sources turn down your request for funding, what source is most likely to say yes? Why is this the case? Is the entrepreneur exploiting a personal relationship with this potential source of capital? What are the consequences of using this source of capital if the business goes bankrupt?