Interpret Financial Leverage


Financial leveraging is the process of using debt to fund asset expansion. Companies are cognizant of the risks associated with over-leveraging, but it also dilutes shareholders’ values. Additionally, the provider of the debt will put a limit on how much risk it has the capacity to undertake.

For this week’s assignment, you will review the implication of financial leverage. Generally, financial leverage serves to magnify changes in net income and related financial ratios. Financial leverage will also help to determine, through research, a major component in the potential growth of a corporation and needs to be implemented effectively. Financial leverage is a key component that is factored into the equation for future expansion of a firm but it is not the only component that is factored into management’s decision. Other factors may include economic and market risks.

Length: Create a 5-minute video with language that supports the role of leveraging, the impacts, both positive and negative, and what matrices will be used to determine if a company adequately leveraged or over leveraged.

References: Include a minimum of 5 scholarly resources.

The completed assignment should address all of the assignment requirements, exhibit evidence of concept knowledge, and demonstrate thoughtful consideration of the content presented in the course. The writing should integrate scholarly resources, reflect academic expectations and current APA standards