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Light Fusion
on Dec 01, 2024

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Financial leverage involves substituting debt for equity in the firm's capital structure. Similarly, operating leverage involves substituting fixed for variable costs in its cost structure.

Financial Leverage

Engaging borrowed assets to increase the anticipated yield from an investment.

Operating Leverage

The degree to which a company uses fixed operating costs, where a higher degree indicates that a small change in sales will have a larger impact on operating income.

Capital Structure

The mix of a company's long-term debt, specific short-term debt, common equity, and preferred equity, which is a significant factor in determining a company's financial health and risk level.

  • Comprehend the correlation between operating leverage and financial leverage.
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Alanlouis EvancullaDec 07, 2024
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