deluge writing is preparing to launch a new product. the cfo has been asked to present a financing plan to the board. what would be his best approach if he wants to keep the company from being heavily leveraged?

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24-10-2022
Business

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deluge writing is preparing to launch a new product. the cfo has been asked to present a financing plan to the board. what would be his best approach if he wants to keep the company from being heavily leveraged?

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Tundexi Tundexi · Answer 1 · 2022-11-02T08:10:39-04:00

As the CFO has been asked to present a financing plan to the board, his best approach to keep the company from being heavily leveraged from product launch will be to maintain a moderate debt level.

What do we mean by Financial leverage?

Basically, a leverage means the use of debt (borrowed capital) in order to undertake an investment or project. The result of the process is to multiply the potential returns from a project but it will also multiply the potential downside risk in case the investment does not pan out.

Going forward, when we refers to a company as "highly leveraged," this means that item has more debt than equity. In conclusion, most investors use leverage to significantly increase the returns that can be provided on an investment.