Financial Leverage:

1. What is financial leverage and how does it affect a firm's business risk?

2. What is the effect of leverage on profitability and debt coverage? 3. What are the implications if a company's financial

leverage is high?

4. All things equal, compare a leveraged firm versus an unleveraged firm.

5. Return on invested capital (ROIC) is unaffected by

financial leverage. Explain.