Operating leverageConsists of fixed costs rather than variable costs. Also, degree to
Positive Operating Leverage
Financial leverage is the use of borrowed money (debt) to finance the purchase of assets with the expectation that the income or capital gain from the new asset will exceed the cost of borrowing.
Combined leverageCombined leverage (ol + fl) represents a company’s total risk related to operating leverage, financial leverage, and the net effect on the eps. By calculating cl, finance managers can make more precise decisions with regards to the company's overall risk. Additionally, combined leverage can help managers identify any potential issues with the company's capital structure.
Beta > 1.0 shows security price is more volatile than market in whole.
Risk free return is guaranteed rate of return with zero risk attached.
Better source of financing, debt or equityDebt is better as interest is deducted from earnings before paying income tax. So, debt financing comes without income tax.
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