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Which source of capital is used to get financial leverage?

Which source of capital is used to get financial leverage? Correct Answer Debt capital

The correct answer is Debt Capital.

Key Points

  • Financial Leverage
    • It is the use of debt to buy more assets.
    • It is employed to increase the return on equity.
    • The financial leverage formula is measured as the ratio of total debt to total assets.
  • Debt Capital
    • Debt Capital refers to borrowed funds that must be repaid at a later date.
    • This is any form of growth capital a company raises by taking out loans.
    • These loans may be long-term or short-term such as overdraft protection.
    • Debt capital does not dilute the company owner's interest in the firm.

Additional Information

  • Equity Capital
    • Equity capital typically comes from funds invested by shareholders.
    • An equity fund doesn't require a business to take out debt which means it doesn't need to be repaid.
    • Equity capital is reported on the stockholder's equity section of a company's balance sheet.
  • Long-term loans
    • It generally refers to a company's loans and other liabilities that will not become due within one year of the balance sheet date.
    • They are a key component of business solvency ratios which are analyzed by stakeholders and rating agencies when assessing solvency risk.
  • Short-term loans
    • It is a type of loan that is obtained to support a temporary personal or business capital.
    • As it is a type of credit, it involves repaying the principal amount with interest by a given due date, which is usually within a year from getting the loan.

Related Questions

Availability of drinking water is continuously decreasing. The government decided to identify those sources of drinking water which getting polluted. The following table depicts the number of polluted sources in a district. Source of drinking water getting polluted Number Wells 24 Handpump 12 Dam 12 Borewell 6 Ponds 18 The pictograph table for the above table will be (A) Source of drinking water getting polluted Number symbol = 6 source Wells Handpump Dam Borewell Ponds (B) Source of drinking water getting polluted Number symbol  = 6 source Wells Handpump Dam Borewell Ponds (C) Source of drinking water getting polluted Number symbol  = 6 source Wells Handpump Dam Borewell Ponds (D) Source of drinking water getting polluted Number symbol  = 6 source Wells Handpump Dam Borewell Ponds
Arrange the following steps of 'adjustment of old partners' capital on the basis of incoming partner's capital in a correct order.
1. Ascertain the present capital of the old partners.
2. Calculation of total capital of firm on the basis of new partner's capital.
3. Finding the surplus/deficit capital.
4. Determining the new capital of each partner.
Select the correct answer:
A passage is given with five questions following it. Read the passage carefully and select the best answer to each question out of the given fouralternatives. Just as space permeates everything in the universe, love permeates every part, every aspect of creation. If there is one answer to the question, “How and why doesthis world exist?” the answer, in one word, is Love. Rather, the answer is Pure Love, since the word love has lost its meaning. Your very existence is an expression of pure unconditional love of the Source (you may call it Consciousness, Creator, God, Divine Self). This is the truth of your being.True love transcends both love and hatred. It is unconditional, unquestioning, boundless, unchanging love. It is overflowing love of the Source for the Source throughall of creation. True love is way beyond the personalized love that two or more individuals assert on one another. Personalized love, though apparently selfless, is rooted in desiresand conditional satisfaction. We have been brought up in a society that judges love based on conditions. We have been made to believe that we can receive love only when we fit into peoplesexpectations. If we are not good enough, we will be deprived of love. These beliefs have influenced the collective psyche of families, groups, communities, and societies since generations to such an extent that love has been reduced tofear of denial. We need to shift from the paradigm of false conditional love to the essence of pure unconditional love . The experience of true love comes with surrender of the false I, in letting go of the feeling of separateness. Without this sacrifice, it is not possible to attain divinelove. When this separate I is discarded, you embrace everything in oneness and catch a glimpse of pure love. True love can be experienced only through giving, not by demanding. People who exist in your life are not here to love you. They are here to remind you that you arethe Source of Love. By knowing that you are the Source of love, you can love yourself, instead of waiting to receive love from the world. Ask yourself, “Why do I need an agent to love myself?” Waiting for the world to love you, is like hiring an agent to love yourself! It is time for you to honor yourself as the Source of love. You have undertaken this human journey to realize and express the boundless love that you truly are. What does source refers to in the last line of the second para of the passage?
A passage is given with five questions following it. Read the passage carefully and select the best answer to each question out of the given fouralternatives. Just as space permeates everything in the universe, love permeates every part, every aspect of creation. If there is one answer to the question, “How and why doesthis world exist?” the answer, in one word, is Love. Rather, the answer is Pure Love, since the word love has lost its meaning. Your very existence is an expression of pure unconditional love of the Source (you may call it Consciousness, Creator, God, Divine Self). This is the truth of your being.True love transcends both love and hatred. It is unconditional, unquestioning, boundless, unchanging love. It is overflowing love of the Source for the Source throughall of creation. True love is way beyond the personalized love that two or more individuals assert on one another. Personalized love, though apparently selfless, is rooted in desiresand conditional satisfaction. We have been brought up in a society that judges love based on conditions. We have been made to believe that we can receive love only when we fit into peoplesexpectations. If we are not good enough, we will be deprived of love. These beliefs have influenced the collective psyche of families, groups, communities, and societies since generations to such an extent that love has been reduced tofear of denial. We need to shift from the paradigm of false conditional love to the essence of pure unconditional love . The experience of true love comes with surrender of the false I, in letting go of the feeling of separateness. Without this sacrifice, it is not possible to attain divinelove. When this separate I is discarded, you embrace everything in oneness and catch a glimpse of pure love. True love can be experienced only through giving, not by demanding. People who exist in your life are not here to love you. They are here to remind you that you arethe Source of Love. By knowing that you are the Source of love, you can love yourself, instead of waiting to receive love from the world. Ask yourself, “Why do I need an agent to love myself?” Waiting for the world to love you, is like hiring an agent to love yourself! It is time for you to honor yourself as the Source of love. You have undertaken this human journey to realize and express the boundless love that you truly are. According to the passage, whom to honour as the source of love?
Operating leverage x Financial leverage = ________
Operating Leverage and Financial Leverage of a firm are 3 and 2, respectively. If sales increase by 6%, then earnings before tax will rise by:
Under which of the following approaches, the cost of equity is assumed to increase linearly with leverage, i.e, the average cost of capital remains constant with increased use of leverage?  1. Net Operating Income Approach 2. Net Income Approach 3. Traditional Approach 4. Walter Approach
In the following question, sentences of a paragraph have been jumbled and labelled as A, B, C, and D. You are required to rearrange the jumbled sentences of the paragraph and mark your response accordingly by selecting the correct option.  A. Financial literacy can enable an individual to build up a budgetary guide to distinguish what he buys, what he spends, and what he owes. B. This subject additionally influences entrepreneurs, who incredibly add to the financial development and strength of our economy.  C.  It empowers people with basic knowledge of investment options, financial markets, capital budgeting, etc. D.  Financial literacy helps people in becoming independent and self-sufficient. 
When labour is plotted on X-axis and capital is plotted on Y-axis and an iso-quant is prepared, then which of the following statements is/are false ? (a) Marginal rate of technical substitution of labour for capital is equal to the slope of the iso-quant. (b) Marginal rate of technical substitution of labour for capital is equal to change in the units of capital divided by the change in the units of labour. (c) Marginal rate of technical substitution of labour for capital is the ratio of marginal productivity of capital to marginal productivity of labour.
When labour is plotted on X-axis and capital is plotted on Y-axis and an isoquant is prepared, then which of the following statement(s) is/arefalse?
1. Marginal rate of technical substitution of labour for capital is equal to the slope of the iso-quant.
2. Marginal rate of technical substitution of labour for capital is equal to change in the units of capital divided by the change in the units of labour.
3. Marginal rate of technical substitution of labour for capital is the ratio of marginal productivity of capital to marginal productivity of labour.