If the rate of earnings on investment for a company is 16%, a situation of unfavourable financial leverage will be said to arise when the rate of interest payable on debt capital is ______.

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If the rate of earnings on investment for a company is 16%, a situation of unfavourable financial leverage will be said to arise when the rate of interest payable on debt capital is more than 16%. Explanation: • When a company earns 16% on its investments but pays more than 16% on debt, the cost of debt is higher than the return. • This results in a loss for shareholders, which is an unfavourable financial leverage situation. If the interest rate is less than 16%, the company benefits, and the leverage is favourable.

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