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NATURE OF INDUSTRY

NATURE OF INDUSTRY The nature of industry is one of the most important elements in determining the financial leverage a firm can carry safely without any risk of bankruptcy. If an industry’s are subject to wide fluctuations, over a business the firm should have...

CONTROL

CONTROL Another consideration in planning the types of funds to use is the attitude of the management towards control. Lenders have no direct voice in the management of a company. They may, course, place certain restrictions in the loan agreement on the...

LIQUIDITY ASPECT

LIQUIDITY ASPECT Cash Flow Analysis EBIT-EPS analysis and coverage ratios are very useful in making explicit the impact of leverage on EPS and on the firm’s ability to meet its commitments at various levels of EBIT. But the EBIT is interest ratio is less than a...