cryptohunter
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Financial leverage is like using borrowed money to make more money or take bigger risks with investments. It's an important part of how a company sets up its money stuff, affecting how much reward and risk the owners take on.
When a company uses financial leverage, it borrows money through things like loans or bonds to run its business or make investments. This makes the impact of its profits on what the owners put in (equity) much bigger. If the profits are more than what it costs to borrow, owners get more money. But if the profits are less, using leverage can make losses worse.
Financial leverage also helps a company figure out the best mix of borrowing.. Borrowing usually means paying fixed interest, but it also comes with tax benefits that make overall costs lower. But borrowing too much makes things risky and could lead to financial problems.
When a company uses financial leverage, it borrows money through things like loans or bonds to run its business or make investments. This makes the impact of its profits on what the owners put in (equity) much bigger. If the profits are more than what it costs to borrow, owners get more money. But if the profits are less, using leverage can make losses worse.
Financial leverage also helps a company figure out the best mix of borrowing.. Borrowing usually means paying fixed interest, but it also comes with tax benefits that make overall costs lower. But borrowing too much makes things risky and could lead to financial problems.
