1. Increased Earnings: When used effectively, financial leverage can significantly increase a company's earnings. The returns on investments made with borrowed funds can exceed the interest payments, thus boosting overall profitability. 2. Tax Advantages: Interest payments on debt are often tax-deductible, which can provide a tax shield and reduce the company's taxable income. 3. Control Retention: Using debt instead of issuing new equity allows existing owners to retain control over the company. This is particularly important for businesses that do not want to dilute ownership.