Cash Flow and Its Analysis Term Paper

Open, View, and/or
Download this Document

Total Length: 547 words ( 2 double-spaced pages)

Total Sources: 0

Page 1 of 2

Cash Flow Analysis

Discuss Cash Flow And Its Analysis

Financial Leverage

Financial leverage refers to the use of a company's assets and liabilities targeting to earn profits upon balancing the risks associated. Financial leverage follows the argument in physics of lever where little force is used to lift heavy objects. Financial leverage uses debts and stock (Preferred stock) to increase earning. Leverage is a significant measure that financial institutions use to increase benefits though it comes with risks.

Benefits and risks of financial leverage

Use of financial leverage increases the earning and thus, higher profits for a financial institution. In cases where a company successfully uses leverage their credit rating increases since it a demonstration of how well they can tackle risks related to debt. Other benefits include efficiencies in scale of operations and higher cash flows.

Stuck Writing Your "Cash Flow and Its Analysis" Term Paper?

View All Our Example Cash Flow and Its Analysis Term Paper

Have A Custom Example Essay Written



Use of financial leverage puts an institution in risk of insufficient operation income. The leverage incurred is always a liability so is the small amount used to acquire the leverage. The institution runs the risk of inability to meet its short-term obligation to customers and shareholders. This likely to be the case in times of low economic performance that implies lower turnovers. It is generally accepted should the amount leveraged fail to yield positive income then the company will have decreased returns to shareholders.

Banks ROA and ROE compared to other industries

Return on Assets (ROA) is a measure of a company's profitability given the total asset invested. Return on equity (ROE) measures earning on funds held by a company for its shareholders or customers. It is appreciated that banks choose to operate on the funds….....

Show More ⇣

     Open the full completed essay and source list


OR

     Order a one-of-a-kind custom essay on this topic


sample essay writing service

Cite This Resource:

Latest APA Format (6th edition)

Copy Reference
"Cash Flow And Its Analysis" (2012, June 16) Retrieved July 8, 2025, from
https://www.aceyourpaper.com/essays/cash-flow-analysis-60766

Latest MLA Format (8th edition)

Copy Reference
"Cash Flow And Its Analysis" 16 June 2012. Web.8 July. 2025. <
https://www.aceyourpaper.com/essays/cash-flow-analysis-60766>

Latest Chicago Format (16th edition)

Copy Reference
"Cash Flow And Its Analysis", 16 June 2012, Accessed.8 July. 2025,
https://www.aceyourpaper.com/essays/cash-flow-analysis-60766
   

Open, View, and/or
Download this Document
order custom essay example