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Remarkr
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Leverages

The fixed cost assets or sources of funds to magnify the returns to its owners.

James Home: Leverage is the employment of an asset or sources of funds for which the firm has to pay a fixed cost or fixed return.

There are three types of leverages:

  1. Operating Leverage
  2. Financial Leverage
  3. Combined Leverage

Types of Leverage displayed in a flowchart style.

Formulae

Operating Leverage

Financial Leverage

Combined Leverage