Cash Flow Analysis : Cash Flows Analysis Essay

977 Words Oct 22nd, 2016 4 Pages

Cash Flow Analysis
Leveraging is defined as the use of borrowed capital to carry out business in hope of getting returns to repay. A limited leverage is important because financial leveraging allows a strong access to capital. To start, people of companies who do not have the initial capital, leveraging can help one kick start the business if used wisely. However, there should be limits on the amount of leverage to expose your business as it comes with risks. For businesses that are already started, leveraging assists in capital injecting and ensures the continuity of the business. When used successfully, leveraged finance may help businesses gain more revenues and profit that may not be possible if it is not used.
Limited leverage reduces the amount of financial risk inform of interest that lenders require the rate of return to be sufficient to cater for the extra risk involved when the business borrow money that must be finally be paid back. It is also important because it helps reduce the costs that are involved in heavy debt leveraging including facilitating costs, administration costs, the interest itself among others. However, a limited amount of it is essential as it reduces the tax expense because interest is a deductible and allowable expense.
I feel that it would be inappropriate for Stephanie 's mother to call the bank manager and his wife for assistance, because the financial analysis alone may help her secure a loan without…

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