Research Article
Impact of Leverage on Risk of the Companies
Md. Juman Hussan*
Metropolitan University, Bangladesh
- *Corresponding Author:
- Md. Juman Hussan
Metropolitan University, Bangladesh
Tel: +44 20 7423 0000
E-mail: jumanhussan@gmail.com
Received Date: June 01, 2016; Accepted Date: July 14, 2016; Published Date: July 21, 2016
Citation: Hussan J (2016) Impact of Leverage on Risk of the Companies. J Civil Legal Sci 5:200. doi:10.4172/2169-0170.1000200
Copyright: © 2016 Hussan J. This is an open-access article distributed under the terms of the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited.
Abstract
In modern competitive business era, the ability to increase return of the firm is mostly depends on efficient use of leverage in the capital structure. Leverage can be defined as a long term debt financing that improves the permanent financial performance as well as the success of the organization. It also explained as the use borrowed funds to establish investment and return on that investment but it is more risky if they cannot be able to generate higher rate of return in compare with cost of capital. For this reason the determination of the proportion of debt and equity is one of the most essential decisions that the organization faces, and any variability in leverage can affect a company’s financial capacity, risk, return, investment, strategic decision and the wealth maximization of organization.
