Written with graceful simplicity, The Big Wave won the Childrenâs Book Award of the Child Study Association of America when it was first released. This ebook features an illustrated biography of Pearl S. Buck including rare images from the authorâs estate. Read on Scribd mobile: iPhone, iPad and Android.
Well, the âadvantageâ of increased financial leverage is a potentially higher return on equity. The disadvantage, on the other hand, is that the business is now riskier as it is financed with more debt (when revenue falls for unexpected reasons, there's now a whole lot of interest that still has to be paid).
Option 2) Profit is 10% x $4,000,000 = $400,000 using financial leverage. Using financial leverage the profit went from $100,000 to $400,000 but the financial risk increased. If the values went down 10% you would lose $400,000 if you used financing instead of $100,000 if you paid cash.