You are viewing this post: FIN 401 – Financial Leverage Effects on EPS and ROE (Part 2) – Ryerson University | financial leverage คือ
Table of Contents
FIN 401 – Financial Leverage Effects on EPS and ROE (Part 2) – Ryerson University
นอกจากการดูบทความนี้แล้ว คุณยังสามารถดูข้อมูลที่เป็นประโยชน์อื่นๆ อีกมากมายที่เราให้ไว้ที่นี่: ดูความรู้เพิ่มเติมที่นี่
www.FIN401.ca
Financial leverage explained
What is financial leverage? Financial leverage is a story of assets and their returns on one side, and the way the assets are financed on the other side. The concept of financial leverage can be applied to companies, investment portfolios, and even to the house you own. In this example, we look at a factory with $1 million in assets (buildings, machines, inventory, etcetera). These assets generate an annual net income of $100,000. The return on assets is therefore 10%, $100K in net income divided by $1 million in assets. How are these assets financed? Let’s assume the assets are financed fully by equity, shareholder capital. $100K net income divided by $1 million in equity is 10% return on equity. So far, so good.
Equity is not the only way to finance assets. You could also go to the bank for a loan. How about financing the assets 50% with equity, and 50% with debt. Debt hardly ever comes for free, let’s assume the net income drops to $80,000 due to the interest charged. Return on assets is now 8%: $80,000 net income divided by $1 million in assets, which is lower than the 10% we had before. Return on equity goes up: $80,000 in net income divided by $500,000 in equity is 16%. This is the effect of financial leverage! Return on equity was 10% when the assets were financed fully by equity, and return on equity is 16% when the assets are financed 50/50 with equity and debt.
How about taking that one step further. What if we finance the assets with $200,000 in equity and $800,000 in debt? Net income drops to $68,000, and return on assets drops accordingly to 6.8%. Return on equity however goes up dramatically. $68,000 in net income divided by $200,000 in equity generates a return on equity of 34%!
One more step. What if we finance the assets with only $100,000 in equity and a massive $900,000 in debt (assuming you can find a bank that is willing to grant or arrange a loan with that kind of financial leverage)? Net income drops to $64,000, and return on assets drops accordingly to 6.4%. Return on equity goes up dramatically. $64,000 in net income divided by $100,000 in equity generates a return on equity of 64%!
Let’s summarize these four financial leverage scenarios, with the very important disclaimer that we are assuming a very linear and very stable world. In this specific example, $1 million in assets fully financed with equity generate 10% return on assets and 10% return on equity. The same assets financed 50/50 between equity and debt, generate 8% return on assets and 16% return on equity. The financial leverage is 2: for every dollar of equity, there are two dollars of assets. If financial leverage is 2, then ROE is 2 times ROA. When we go to 20% equity and 80% debt, ROA drops to 6.8% while ROE jumps to 34%. The financial leverage is 5: for every dollar of equity, there are five dollars of assets. If financial leverage is 5, then ROE is 5 times ROA. It looks like the higher the financial leverage, the higher the return on equity. When we go to 10% equity and 90% debt, ROA drops to 6.4% and ROE could skyrocket to 64%. The financial leverage is 10: for every dollar of equity, there are ten dollars of assets. If financial leverage is 10, then ROE is 10 times ROA. Why do we mention the word “could” in one of the previous sentences?
Well, real life can be far more volatile than a nice clean example on paper. What if the $64,000 net income turns into an unexpected loss of $200,000? In a high financial leverage situation, this completely wipes out the existing equity. Either the shareholder urgently contributes more equity to the company, or the bank will take possession of the assets, which were the collateral for the loan.
Financial leverage can “multiply” gains…. and wipe out equity in case of unexpected losses.
Philip de Vroe (The Finance Storyteller) aims to make strategy, finance and leadership enjoyable and easier to understand. Learn the business and accounting vocabulary to join the conversation with your CEO at your company. Understand how financial statements work in order to make better investing decisions. Philip delivers financetraining in various formats: YouTube videos, classroom sessions, webinars, and business simulations. Connect with me through Linked In!
วิธีการใช้งาน Binance Future l สอนใช้งาน Binance EP.2
วิธีการใช้งาน Binance Future l สอนใช้งาน Binance EP.2
คลิปนี้นำเสนอวิธีการใช้งาน Binance Future ซื้อเป็นการแพลมฟอร์มการซื้อขายสัญญาล่วงหน้าของสกุลเงินคริปโต
เนื้อหาจะประกอบไปด้วย
ฺBinance Future คืออะไร
Future หรือสัญญาล่วงหน้าคืออะไร แตกต่างจากการซื้อขายปกติ (Spot) อย่างไร
วิธีการใช้งาน Binance Future คืออะไร
ข้อควรรู้และข้อควรระวังมีอะไรบ้าง
การเทรดเป็นตัวอย่างด้วยเงิน 3000 ที่ความเสี่ยงสูงสุดผลลัพธ์จะเป็นอย่างไร
สอนมือใหม่ซื้อขายBitcoin Binance ILearnALot
สารบัญความรู้
📌 Playlist ความรู้พื้นฐานเกี่ยว Bitcoin และ Blockchain: https://bit.ly/38R9pV8
.
📌 Playlist สอนมือใหม่หัดซื้อขาย Bitcoin : สอนตั้งแต่เปิดบัญชีจนซื้อขายเป็น : https://bit.ly/3nQ3CU3
.
📌 Playlist บทวิเคราะห์ราคาบิดคอยน์ (Bitcoin) และเหรียญ Crytocurrency อื่นๆ : https://bit.ly/38WubmF
.
📌 Playlist ความรู้พื้นฐานด้านการเทรดด้วย Technical Analysis : https://bit.ly/3o3KMsV
.
📌 Playlist นิทานก่อนเทรด เล่าประสบการณ์ดีๆ และร้ายๆ ในโลกของการเทรด : https://bit.ly/2LUXOMj
ติดตามเพิ่มเติมได้ที่
Facebook : https://www.facebook.com/ILearnALotAboutBitcoin/
Youtube : https://bit.ly/32aKs48
กลุ่ม Line OpenChat : https://bit.ly/3tgz4il
สอนมือใหม่ซื้อขายBitcoin Binance ILearnALot Bitkub Future BinanceFuture
Lecture-63-CA IPCC/Intermediate Financial Management- Leverages-I
Discussion on the basics of Leverages.
Financial Management Lectures for CA IPCC/Intermediate, CMA, CS and Other Courses.
CA CS CMA FinancialManagement FMFreeLectures FinancialManagementForCAInter FinancialManagementForCAIntermediate CostingFMForCAIPCC financialManagementForCMA Leverages OperatingLeverage DegreeofOperatingLeverage FinancialLeverage DegreeofFinancialLeverage CombinedLeverage DegreeofCombinedLeverage
Visit our website for all the Notes \u0026 Questions: https://www.ksjteaching.org
Telegram Group : https://t.me/ksjteachingcainter
Telegram Channel : https://t.me/ksjteaching758
William Ackman: Everything You Need to Know About Finance and Investing in Under an Hour | Big Think
Everything You Need to Know About Finance and Investing in Under an Hour
Watch the newest video from Big Think: https://bigth.ink/NewVideo
Join Big Think Edge for exclusive videos: https://bigth.ink/Edge
Bill Ackman is one of the top investors in the world, and he’s said that he’s aiming to have \”one of the greatest investment track records of all time.\” As the CEO of Pershing Square Capital Management, the hedge fund he founded, he oversees $19 billion in assets.
But before he became one of the elite, he learned the basics of investing in his early 20s.
This Big Think video is aimed at young professionals just starting out, as well as those who are more experienced but lack a financial background.
Ackman takes viewers through the founding of a lemonade stand to teach the basics, explaining how investors pay for equity, a word interchangeable with \”stock.\” In the example, the owner starts with $750, with $250 of that coming from a loan.
WILLIAM ACKMAN:
William Ackman is founder and CEO of Pershing Square Capital Management. Formed in 2003, the hedgefund has acquired significant shares in companies such as JC Penney, General Growth Properties, Fortune Bands and Kraft Foods. Ackman advocates strategies of \”activist investing,\” the practice of using stock shares in publiclytraded companies to influence management practices in a way that benefits shareholder interests.
TRANSCRIPT:
Hi, I’m Bill Ackman. I’m the CEO of Pershing Square Capital Management and I’m here today to talk to you about everything you need to know about finance and investing and I’m going to get it done in an hour and you’ll be ready to go.
How to Start and Grow a Business
So let’s begin. We’re going to go into business together. We’re going to start a company and we’re going to start a lemonade stand and now I don’t have any money today, so I’m going to have to raise money from investors to launch the business. So how am I going to do that? Well I’m going to form a corporation. That is a little filing that you make with the State and you come up with a name for a business. We’ll call it Bill’s Lemonade Stand and we’re going to raise money from outside investors. We need a little money to get started, so we’re going to start our business with 1,000 shares of stock. We just made up that number and we’re going to sell 500 shares more for a $1 each to an investor. The investor is going to put up $500. We’re going to put up the name and the idea. We’re going to have 1,000 shares. He is going to have 500 shares. He is going to own a third of the business for his $500.
So what is our business worth at the start? Well it’s worth $1,500. We have $500 in the bank plus $1,000 because I came up with the idea for the company. Now I’m going to need a little more than $500, so what am I going to do? I’m going to borrow some money. I’m going to borrow from a friend and he’s going to lend me $250 and we’re going to pay him 10% interest a year for that loan.
Now why do we borrow money instead of just selling more stock? Well by borrowing money we keep more of the stock for ourselves, so if the business is successful we’re going to end up with a bigger percentage of the profits.
So now we’re going to take a look at what the business looks like on a piece of paper. We’re going to look at something called a balance sheet and a balance sheet tells you where the company stands, what your assets are, what your liabilities are and what your net worth or shareholder equity is. If you take your assets, in this case we’ve raised $500. We also have what is called goodwill because we’ve said the business—in exchange for the $500 the person who put up the money only got a third of the business. The other twothirds is owned by us for starting the company. That is $1,000 of goodwill for the business. We borrowed $250. We’re going to owe $250. That is a liability. So we have $500 in cash from selling stock, $250 from raising debt and we owe a $250 loan and we have a corporation that has, and you’ll see on the chart, shareholders’ equity of $1,500, so that’s our starting point.
Now let’s keep moving. What do we need to do to start our company? We need a lemonade stand. That’s going to cost us about $300. That is called a fixed asset. Unlike lemon or sugar or water this is something like a building that you buy and you build it. It wears out over time, but it’s a fixed asset. And then you need some inventory. What do you need to make lemonade? You need sugar. You need water. You need lemons…
Read the full transcript at https://bigthink.com/videos/learntoinvestandstartabusinessinunderanhour
นอกจากการดูหัวข้อนี้แล้ว คุณยังสามารถเข้าถึงบทวิจารณ์ดีๆ อื่นๆ อีกมากมายได้ที่นี่: ดูบทความเพิ่มเติมในหมวดหมู่INVESTMENT
Articles compiled by CASTU. See more articles in category: INVESTMENT
