 This section is based upon the concept of the effects of the financial leverage. So you must be thinking what is meant by financial leverage. So basically firms, when they are short of money, when they are having less capital, they borrow money from the external sources. They borrow money from banks. They borrow money from some other corporates. So what happens eventually is that that particular usage of borrowed money is called leveraging the finances. So you are like kind of pushing up the overall financial assets which you are having by borrowing the money. So when we look at the aspects of or the effects of financial leverage, it means that we are basically interested in identifying that what would be the possible usage advantages or disadvantages of borrowing money from the external sources. So when we look at the firms who borrow from the external sources and they use this concept of financial leveraging their assets or their overall financial position, they are basically looking at the shareholders and when we borrow a lot of money, it means that the overall return on equity will be greater. But it has its own pros. That means if you are borrowing a lot of money from the external sources, you need to repay the money and at the top of it, you will have to pay the interest over the principle which you have borrowed. So this sometimes can be, can be, can put a firm in a disadvantageous situation. When you borrow in such a situation, it gives you the advantage that you have more finances to work in your business. You can maintain your inventory more, you can increase the production level. But at the same time, its bad side is that you will have to pay the interest over it and your income can go to the funding resource from which you have borrowed this money. So this is its bad side. And because of this, firms go to operational risk and they have to bear the financial risk as well as the operational risk. So this means that the benefit of financial leverage is also the benefit of the firms and its loss. So when we look at the advantages which a firm can have by using this borrowed money, which means that what could be the possible effects, the good side of financial leveraging the overall business activities or business operations. So the benefit is that it will give you the interest tax shield. So the meaning of the interest tax shield is that when you have borrowed the money, you are paying the interest over it and the income generated or the profits generated by you, some of them are in the form of interest and the principal amount that you want to return, so as a result, what happens is that the overall tax levy that you have to pay, that will go down because your overall profits or the income generated, you have to pay the repayment of interest and repayment of the principal amount. So that the good side of financial leveraging is that it kind of protects you or provides you tax shield. So this is one good thing associated with financial leveraging. The next important thing is that when we have used the borrowed money for a firm, the bad side is that obviously you have to pay the cost of debt, you have to pay the interest, you have to pay the principal, and there could be some situations in the market where the terms and conditions are tight, where the rate of interest is high, so you have to go to a higher level and pay the cost of debt. So that is the negative side of using the borrowed money, but like sometimes the firms do not have any second option other than this that they will have to borrow the money. So they financially have to borrow money to leverage themselves, but that has to be carried out smartly, that obviously with that your costs will increase, you will get the benefit that immediately you will have funds, but overall your costs will increase, plus you are exposed to more financial risks, plus you are exposed to more operational risks.