Financial leverage breakeven occurs when return on total assets is equal to the cost of borrowed funds.

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Financial leverage breakeven occurs when the return on total assets (ROTA) is equal to the cost of borrowed funds or interest expense. This means that the company is earning enough on its assets (after deducting operating expenses) to cover the cost of borrowing. If ROTA is lower than the cost of borrowing, the company may be at a risk of default on its loans, while if ROTA is higher than the cost of borrowing, the company may benefit from financial leverage, i.e., earning a higher return on equity by using borrowed funds.

Financial Leverage Breakeven Occurs When Return on Total Assets Is