Financial leverage is called favourable if

return on investment is lower than cost of debt

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return on investment is higher than cost of debt

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debt is nearly available

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If the degree of existing financial leverage is low

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Solution

The correct option is B
return on investment is higher than cost of debt

If ROI is higher than cost of debt financial leverage in this case called favourable.

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Similar questions

Financial leverage is called favourable if

(a) Return on investment is lower than the cost of debt

(b) Rol is higher than the cost of debt

(d) If the degree of existing financial leverage is low

Financial leverage is called favourable if

(a) Return on investment is lower than the cost of debt

(b) ROI is higher than the cost of debt

(d) If the degree of existing financial leverage is low

Financial leverage is the amount of total debt in the capital. It is calculated as:

Financial leverage is a proportion of debt in an overall capital. State whether true or false.

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