Top suggestions for Shorten: [Financial Leverage is the degree to which a company uses fixed income securities such as debt and preferred equity. The more debt financing a company uses, the higher its financial leverage. A high degree of financial leverage means high interest payments, which negatively affect the company’s bottom-line earnings per share. Financial risk is the risk to the stockholders that is caused by an increase in debt and preferred equities in a company’s capital structure. As a company increases debt and preferred equities, interest payments increase, reducing EPS. As a result, risk to stockholder return is increased. A company should keep its optional capital structure in mind when making financing decisions to ensure any increases in debt and preferred equity increase the value of the company.] ] |