21
Leverage
OBJECTIVES
To explain what leverage actually means
To elucidate the ROI leverage
To discuss different forms of marginal-analysis leverage, such as operating leverage, fixed-charge leverage and combined leverage
To explain financial leverage
In general sense, a lever is the term used to refer to anything used to move something up, and leverage is therefore the advantage gained from the operation of a lever. This term is also used in corporate finance with a somewhat similar connotation. The discussion of leverage in this area of study is related to the acceleration of profits through changes in certain financial variables, which means in turn that leverage is a tool of profit planning.
Since the purpose of leverage is to raise ...
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