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Analysis Of The Influence Of A Company’S Indebtedness On The Financial Risk

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  • LAPADUSI MIHAELA LOREDANA

    (Faculty of Economics and Business Administration, “Constantin Brancusi” University of Tg-Jiu, Romania)

  • FLOREA IANC MARIA MIRABELA

    (Faculty of Economics and Business Administration, “Constantin Brancusi” University of Tg-Jiu, Romania)

Abstract

Awareness of indebtedness and financial risk represents a great importance not only for the management of the company but also for creditors, investors, institutional investors, rating agencies, etc. An indebtedness analysis implies its effect on financial risk through financial lever coefficient or the financial lever. A financial lever is a notion originating in physics and it is the force that is applied in order to give a boost of a process or a phenomenon. However, in economics that notion was adapted and can be regarded as the strenght of different financial categories, financial instruments used in order to give a boost in a certain sense to various economic processes or activities in order to achieve the established objectives. More specifically we can say that the financial lever or the financial leverage expresses the impact of the financial structure over the company’s profitability. The research aims at analysing indebtedness and its influence over the financial risk and all the aspects underlined in the present article will prove the assumption that a company's performance and its capacity to produce profit depends mainly on the management and the use of financial resources. The purpose of present article is to highlight the impact of indebtedness over financial risk through the financial lever. The main objectives of the article set out to achieve this purpose are: the theoretical approach of a company's overall indebtedness, the analysis of the financial levers, and the analysis of the positive and negative leverage effects.

Suggested Citation

  • Lapadusi Mihaela Loredana & Florea Ianc Maria Mirabela, 2015. "Analysis Of The Influence Of A Company’S Indebtedness On The Financial Risk," Annals - Economy Series, Constantin Brancusi University, Faculty of Economics, vol. 0, pages 193-200, July.
    • Handle: RePEc:cbu:jrnlec:y:2015:v:special:p:193-200
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    References listed on IDEAS

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    1. Marilena Mironiuc, 2006. "Metodologia de analiza a riscului economic pentru intreprinderea multiprodus," Analele Stiintifice ale Universitatii "Alexandru Ioan Cuza" din Iasi - Stiinte Economice (1954-2015), Alexandru Ioan Cuza University, Faculty of Economics and Business Administration, vol. 52, pages 31-36, November.
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