The use of debt in a firm's capital structure is called Financial Leverage. It measures the amount of debt is a firm's capital structure.
The more debt a first must use, the more financial leverage it has. Using financial leverage is like a double edged sword because it can magnify the firm's potential gains and loses. It can Financial Leverage can increase returns for shareholders but also eliminate profits in rough times.
Complete Accounting Tutorial
This download package includes explanations of 30 accounting topics, financial and managerial exams, cheat sheet, bookkeeping test, accounting puzzles, practice drills, Q&A, and an accounting dictionary.
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