MANAGEMENT

Detailed explanation-1: -It is said to be a favourable situation when the return on investment becomes higher than the cost of debt. In other words, as the Return on investment becomes greater, the earning per share also increases and the financial leverage is said to be favourable.

Detailed explanation-2: -When the return on investment is higher than the cost of debt.

Detailed explanation-3: -Financial leverage refers to proportion of debt in overall capital. It is said to be favorable situation when the return on investment becomes higher than cost of debt. ROI becomes greater, EPS also increases and financial leverage is said to be favorable.

Detailed explanation-4: -Leverage can be favorable or unfavorable. It is positive when earnings are greater than debt costs. However, it is negative if the company’s earnings are lower than the cost of securing the funds. Debt financing is an essential source of capital to support the limited investment of stockholders.

Detailed explanation-5: -Leverage is the amount of debt a company has in its mix of debt and equity (its capital structure). A company with more debt than average for its industry is said to be highly leveraged. Leverage is not necessarily bad.