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What is Capital Structure Decisions and Risks about?

This document discusses operating leverage and financial leverage. It provides examples comparing operational plans with different degrees of operating leverage. Plan A has high fixed costs and low variable costs, resulting in high operating leverage. Plan U and Plan L have higher variable costs and lower fixed costs, resulting in lower operating leverage. Leverage magnifies returns on equity, but also increases risk as fixed costs must still be covered if sales decline. The document also introduces capital

Author

Adam

Language

EN