Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Can someone please help me with these finance vocab terms???? Thank you :) pictures are attached just comment below Tenn Bu sin ess risk Asymmetric

Can someone please help me with these finance vocab terms???? Thank you :) pictures are attached just comment below

image text in transcribed
Tenn Bu sin ess risk Asymmetric in formation Operating leverage Financial leverage Reserve borrowing capacity Signal Financial risk EPS indifference point Optimal capital structu re Capital structure Answer EDD EDD D DD Description The level and nature of risk attributable to a firm's activities and operations, and ignoring the risks associated with the firm's capital structure. The risk that is borne solely by the firm's shareholders, and results from a firm's decision to finance its assets using fixed-cost sources of capital, including debt securities and preferred stock. This practioe of employing a large proportion of fixedcost sources of financing, such as debt securities and preferred stock, exposes a firm to business risk. The situation in which outsiders, such as external shareholders, credits, suppliers, and customers have less and inferior information about a firm's past, current. and future conditions and prospects, oompared to the firm's managers. The mix of debt, preferred stock, and common stock that maximizes the price of the firm's common stock. The level of sales at which a firm's earnings per share {EFS} are the same, regardless of which of two alternative capital structures are oompared. The extent to which a firm's oost structure oontains a large proportion of fixed oosts, which raises its level of business risk if the firm's sales decline. Management's decision to issue new common stock versus new debt securities in response to its evaluation of the firm's future opportunities. The combination of common equity, preferred stock, and debt capital used to finanoe a firm's assets. The financial flexibilityr available to a firm which allows it to borrovlI additional debt capital when needed or desired as a result of using less than the optimal level of debt in its current capital structure

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Financial Management For Decision Makers

Authors: Peter Atrill

7th Edition

129201606X, 978-1292016061

More Books

Students also viewed these Finance questions