LEVERAGE HYPOTHESIS Definition

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LEVERAGE HYPOTHESIS is the theory that managers have incentive to avoid technical default of loan covenants because it could result in increases in the firm's cost of capital.

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BACKDOOR LISTING is a technique used by a company which failed to get listed on an exchange, whereby the company acquires and merges with a company already listed on that exchange.

EFFECTIVE INTEREST RATE is the cost of credit on a yearly basis expressed as a percentage. Includes up-front costs paid to obtain the loan, and is, therefore, usually a higher amount than the interest rate stipulated in the note.

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