When is the financial leverage favorable?

When the return on investment is higher than the cost of debt.

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When the rate of interest is higher than the cost of debt

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When the rate of transaction is greater than the cost of debt and credit

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When the rate of transaction is higher than the cost of debt

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Solution

The correct option is A
When the return on investment is higher than the cost of debt.

When the return on investment is higher than the cost of debt.

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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

___ rises with an increase in debt, only when the ROI is more than the cost of debt.

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