Written with graceful simplicity, The Big Wave won the Childrenâs Book Award of the Child Study Association of America when it was first released. This ebook features an illustrated biography of Pearl S. Buck including rare images from the authorâs estate. Read on Scribd mobile: iPhone, iPad and Android.
Well, the âadvantageâ of increased financial leverage is a potentially higher return on equity. The disadvantage, on the other hand, is that the business is now riskier as it is financed with more debt (when revenue falls for unexpected reasons, there's now a whole lot of interest that still has to be paid).
Therefore, corporate management has an obligation to use a thorough and prudent process for establishing a companyâs target capital structure. The capital structure is how a firm finances its operations and growth by using different sources of funds. Empirical Use of Financial Leverage. Financial leverage is defined as the extent to which fixed-income securities and preferred stock are used in a companyâs capital structure. Financial leverage has value due to the interest tax shield that is afforded by the U.S. corporate income tax law.