Financial leverage is called favourable if: Options: A . &nbsp ROI is higher than the cost of debt B . &nbsp Debt is easily available C . &nbsp Return on Investment is lower than the cost of debt D . &nbsp If the degree of existing financial leverage is low

Financial leverage is called favourable if:

Discussion Forum : Financial Management

Question -

Financial leverage is called favourable if:

Options:

A . ROI is higher than the cost of debt

B . Debt is easily available

C . Return on Investment is lower than the cost of debt

D . If the degree of existing financial leverage is low

Answer: Option A
:
A

Financial leverage is the degree to which a company uses fixed-income securities such as debt. Therefore, financial leverage is favorable when the uses to which debt can be put generate returns (ROI) greater than the interest expense associated with the debt (Cost of Debt).

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