Leverages Homework Help
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Leverage is a big part of financial management and is absolutely crucial if you want to be a financial manager. By using leverage, a company has the potential to win big and lose magnanimously as well, even more than the margin they had put down. Thus, it is crucial to understand the intricacies of leverages which you can with leverages homework help.
Understanding the concept of leverage
Leverage is defined as a business strategy that involves the use of borrowed money in order to increase the potential return on investment.It is also used to refer to the debt that is used to finance assets. When a company or investment is referred to as ‘highly leveraged’ it basically means that the object has more debt than equity.
With leverages homework help, you can understand the intricacies of this subject which will help you to understand it in simpler terms. At helpmeinhomework.com, we cater to such needs of the students and help them learn faster.
What are the types of leverage?
There are essentially three types of leverages that you can understand with leverages assignment help. They are:
- Operating leverage:It is the use of fixed operating costs such as depreciation, repairs and maintenance, property taxes, etc. in operating a firm.
- Financial leverage: It is primarily concerned with the financial activities of a firm like raising funds, etc.
- Combined leverage: Where both the previous leverages are concerned with fixed charges, when the two are combined, the total risk of a firm is obtained. Combined leverage is related to the risk of not being able to cover total fixed charges.
What are its sources?
There are numerous situations from which leverage can crop up. They are:
- When borrowing from a broker
- Purchasing a home by financing a portion through mortgage debt
- Options and future contracts
- Hedge funds
How does leverage work?
In order to understand leverage completely, you need first to understand how it works. You can do so with leverages assignment help.
Let’s assume that you want to buy 1000 shares of ABC. If the share price is $1, then it would cost you $1000. If the price climbs to 20 cents per share, you can sell them off and make a profit of $200.
But some providers will allow you to buy those shares with leverage. You just need to put down a margin which is a percentage of $1000 and retain full exposure.
If the margin requirement is 10%, you would have to pay $100. And even if the price climbed, you would make the same profit.
Even though you have incurred the same profit in both the cases, however, using leverage you had to put down only $100 instead of $1000 as margin.
How can help me in homework help?
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