Financial Leverage: Seductive But Risky!

Financial Leverage is the art of earning with borrowed funds. No doubt about it, the promise of increased earning power is seductive. Leverage works—but only when the economy is good and earning performance is strong. When the economy turns sour, or when the high-leverage firm delivers a year of net-losses, leverage bites back, showing the true meaning of “double-edged sword.” Earning power shrinks, and the firm struggles to service debt, cover expenses, and pay dividends from meager profits. All the rewards and risks that leverage provides, pass on directly to the firm’s owner-investors. Learn to calculate and understand mainstream financial leverage metrics (gearing ratios). Pick up early warning when your firm is carrying too much debt. Discover before it’s too late that owners will be left out in the cold if the firm liquidates. Learn leverage metrics from the Authority, Solution Matrix Ltd. Start at
Marty Schmidt




Author: Marty Schmidt

Marty Schmidt is Founder and President of Solution Matrix Limited, a Boston-based firm specializing in Business Case Analysis. Dr. Schmidt leads the firm's Management Consulting, Publishing, and Professional Training activities. He holds the M.B.A degree from Babson College and a Ph.D. from Purdue University.