Description
Evaluating the Impact of Financial Leverage on Firm Value: A Mixed-Methods Approach in Different Industry Sectors
Abstract
Today, many businesses use borrowed funds to buy assets to generate revenue. Understanding the leverage percentage consequences on the firm value helps shareholders and organizations make informed decisions on purchasing stocks based on debt levels. Usually, financial leverage is considered a ratio that helps to understand how much a company relies on borrowed funds to finance its operations. People often utilize this type of ratio to assess a company’s financial stability and estimate a company’s ability to meet its obligations. It also aids in maximizing the value of business. It also focuses on recognizing specific sector trends to maximize the organization’s worthiness strategically.
The study uses a mixed method to emphasize the various effects of leverage on a firm’s value. The qualitative approach offers insights into strategic considerations and decision-making processes behind the usage of leverage in different industries. The quantitative method determines the existence of a correlation between financial leverage and a firm’s value by examining the financial information. The research also calculates ROE (return-on-equity), market value, and debt ratio to figure out the influence factors on optimal capital structure.
The paper highlights the findings, such as the key play of financial leverage in firm value creation and sector-specific differences. The study explores the influence factors such as profitability, risk, and stock performance on capital structure. Moreover, it offers a few a practical suggestion for companies who seek to optimize their operations. Based on the opinions of financial managers, industry experts, and corporate executives. The research develops insights into enhancing company performance across diverse industries. It concludes that a higher leverage ratio indicates a company is using more debt financing, which amplifies potential profits. So, to overcome this, it provides a few strategies to achieving long-term growth with lower debts
Read more about the topic
Impact of Financial Leverage on Firm Performance
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