1. Leverage of Money
... reach, enter new markets, increase market share, etc. by borrowing money from others who are willing to loan the money on the principle that the loan will be paid back with interest and within a certain timeframe agreed upon by both parties. This allows the firm to declare the interest paid on the loan as a deduction on taxes. Furthermore, if the money ... borrowed can be invested to return more money back to pay for the interest of the loan then you will have an increase in owners" equity. To see how financial leverage works we will compare a firm who has borrowed money to invest in th...
- Word Count: 545
- Approx Pages: 2
- Grade Level: High School