Explain the Concept of M&M's Homemade Leverage and Why It

question 32

Essay

Explain the concept of M&M's homemade leverage and why it is not equivalent to a firm's debt.

---

Definitions:

Net Loss

The amount by which total expenses exceed total revenues for a specific period, indicating a financial loss for the entity.

Net Increase in Cash

The amount by which cash and cash equivalents rise during a specific period, reflecting a company's liquidity position improvement.

Cash Dividends

Payments made by a company out of its profits to its shareholders, usually in the form of cash.

Statement of Cash Flows

A financial statement that provides aggregate data regarding all cash inflows and outflows a company receives from its ongoing operations, investment, and financial activities.