Risk and leverage

Risk and leverage

Bachelor of Business Studies (BBS) — Second Year

Subject: Fundamentals of Financial Management (MGT 215)

Unit 7: Capital Structure and Leverage

Academic Year: 2083/84

Topic Objectives

After studying this topic, students should be able to:

• Explain the scope and key elements of risk and leverage.
• Apply the relevant financial model, calculation or analytical approach and explain its assumptions and decision implications.

Curriculum Scope

• Business risk and operating leverage
• Financial risk and financial leverage
• Total leverage

Detailed Microsyllabus

1. Operating leverage

   1. Business risk and fixed operating costs.
   2. Sensitivity of operating profit to sales changes.
   3. Calculate operating leverage at a specified activity level.

2. Financial and total leverage

   1. Financial risk from fixed financing commitments.
   2. Sensitivity of shareholder earnings to operating profit.
   3. Combine leverage measures with assumptions and base levels stated.

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Curriculum reference: Tribhuvan University, Faculty of Management, revised four-year BBS curriculum, PDF pages 41-43.

Source note: The curriculum scope above is retained from the existing TU syllabus breakdown. The numbered study subtopics are editorial elaborations for teaching and study, rather than a separately issued TU syllabus. Unit or component allocations apply at their stated level; no separate topic hours or marks are assigned here.