Which conditions would the oversuse of financial leverage be determined to the firm?

Answer 1

The overuse of financial leverage can lead to increased financial risk and potential insolvency for a firm, especially during economic downturns or periods of low cash flow. High leverage amplifies both gains and losses, making it difficult for the firm to meet its debt obligations. Additionally, it can negatively impact the firm's credit rating, increasing borrowing costs and limiting access to new capital. Ultimately, excessive leverage can compromise the firm's long-term stability and growth prospects.