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## COMBINED LEVERAGE TOTAL RISK

COMBINED LEVERAGE:TOTAL RISK The operating leverage has its effects on operating risk and is measured by the percentage change in EBIT due to percentage change in sales. The financial leverage has its effects on financial risk and is measured by the percentage change...

## Measures of Financial Leverages

Measures of Financial Leverages Financial leverage measures the degree of the use of debt and other fixed-cost sources of fund to finance the assets the firm has acquired. As shown above, the use of debt has a magnifying effect on the earnings per share. It can be...

## For a New Company

For a New Company The indifference point can be determined by using the following equations: For on Existing Company If you are human, leave this field blank.Name *Email *Phone *Address *Apt, suite, etc.CountryUnited States (US)United Kingdom...

## Algebraic Approach

Algebraic Approach Mathematically, the indifference point can be obtained by using the following symbols: X = earnings before interest and taxes (EBIT) at the indifference point. N1 = number of equity shares outstanding if only equity shares are issued. N2 = number of...

## Indifference Point

Indifference Point The EBI’T level at which the EPS is the same for two alternative financial plans is referred to as the indifference point/level. The indifference point may be defined as the level of EBIT beyond which the benefits of financial begin to operate...

## EBIT-EPS Analysis

EBIT-EPS Analysis The EBIT-EPS analysis, as a method to study the effect of leverage, essentially involves the comparison of alternative methods of financing under various assumptions of EBIT. A firm has the choice to raise funds for financing its investment proposals...