Question: Question 1: What is the relationship between a firm's operating leverage and its financial leverage? Are the two measures positively correlated, negatively correlated, or unrelated?

Question 1:

What is the relationship between a firm's operating leverage and its financial leverage? Are the two measures positively correlated, negatively correlated, or unrelated? I'm looking for a thorough (long) explanation. Thank you!

Question 2:

In a practical sense, what signs do CFOs look for to determine if their firms are using too much financial leverage? What could a CFO do if these signs were encountered? I'm looking for a thorough (long) explanation. Thank you!

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