Financial leverage
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Financial leverage is the extent to which fixed income securities (debt and preferred stock) are used in a firm's capital structure. If a high percentage of a firm's capital structure is in the form of debt and preferred stock, then the firm is said to have a high degree of financial leverage.
Definitions
According to Financial Management Theory and Practice by Eugene F. Brigham and Michael C. Ehrhardt (13th edition),
- Financial leverage. The extent to which fixed income securities (debt and preferred stock) are used in a firm's capital structure. If a high percentage of a firm's capital structure is in the form of debt and preferred stock, then the firm is said to have a high degree of financial leverage.
Related concepts
- Financial management. A combination of enterprise efforts undertaken in order to procure and utilize monetary resources of the enterprise.
