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Financial Management

The document discusses the mix of debt and equity a firm uses for financing its operations and growth, emphasizing the significance of financial risk and control on investor confidence. It suggests that low debt levels can maximize value, particularly when interest rates are low. The document includes calculations related to earnings before interest and taxes, operating leverage, and financial leverage metrics.

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8 views2 pages

Financial Management

The document discusses the mix of debt and equity a firm uses for financing its operations and growth, emphasizing the significance of financial risk and control on investor confidence. It suggests that low debt levels can maximize value, particularly when interest rates are low. The document includes calculations related to earnings before interest and taxes, operating leverage, and financial leverage metrics.

Uploaded by

preceptorlc
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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(apkal StvucCave

Coplal SCyuctuve vefers o he mix of debt ano


equily a fivm uses to Anarce ils op evalos
and growth

Signlicane
AStec ls vish, yebun, and Valye of ehe Aiva
lonpacts tost of carila
Balarees Financial risk and control
Ihllucnces inves tov conidence and cvedit
I'ne ss

Ne! ncome CN) Appova ch


Asswnes lowe debt tnieare
debt iniease hm val
Suggests loo debl can maimizr valaei
ineresl is bw and no bantap ley vin
(ordasior: N| opproch suppov csng mare oéb fa
tal stlue, assuming sfable
op bimal cp
eanniry s and niamal n'sh
i)
6iven
Sales lo, 0o, 038
Vantable Cast ,oo,000
Cixed Cos 4oo, o00
Debt S, 0o, 00)
Inkevesl ate loY. ’tn éerest-so, 0oo
2: lonevibuli on 2 Sales- Vaviable Cose
Seep

CEavnings Befovp Inberes land


Slep 2; EBIT -Fixed Cose
Tax) lonbibubion
oo,0o0= 000
-too, oo0-

Step 3: EBT (Eanings before Ton) =Eb17-Inby


lo90o0-So, ooo-Sa, ooe

Opevating Leeage (o y
-ContibuGion/ET

Plirancial loeoge CPy


-EAT/ET
-l09,00 Se0oo 2
Svating levevage 3
Ananial Leverage -2

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