Higher leverage negatively affect the growth rate of earnings
What is leverage?
In the world of finance, leverage (also known as gearing in the UK and Australia) refers to any strategy that involves borrowing money to make purchases with the expectation that future earnings will be several times greater than the cost of borrowing. This strategy's name comes from the physics concept of a lever, which increases a tiny input force into a larger output force. Successful leverage increases the relatively little amount of capital required for borrowing into substantial quantities of profit. The strategy does, however, come with a significant danger of not being able to repay a sizable debt. Typically, a lender will establish a cap on the amount of risk it is willing to accept, a cap on the amount of leverage it will allow, and would require the acquired asset to be provided as collateral security for the loan.
To know more about leverage click,
https://brainly.com/question/26978903
#SPJ4
