Financial Leverage Analysis for Small Business

Charles E. Edwards, Philip L. Cooley and Robert H. Zerbst

Entrepreneurship Theory and Practice, 1979, vol. 4, issue 2, 12-21

Abstract: The effects of financial leverage on equity returns may be analyzed in either of two frameworks. When using the net-operating-income model to evaluate leverage, the small-business analyst, unwittingly and by default, makes several implicit assumptions. Most of these implicit assumptions are unrealistic and too restrictive for small businesses. Unencumbered by such restrictive conditions, the cash-flow model can be tailored to meet the distinctive characteristics of small businesses.

Date: 1979
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Persistent link: https://EconPapers.repec.org/RePEc:sae:entthe:v:4:y:1979:i:2:p:12-21

DOI: 10.1177/104225877900400202

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