When EBIT Is Positive, the Effect of Financial Leverage Depends

question 291

True/False

When EBIT is positive, the effect of financial leverage depends on the company's EBIT, that is, leverage is unfavourable when EBIT is relatively high, and leverage is favourable when EBIT is relatively low.

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Definitions:

River

A large natural stream of water flowing in a channel to the sea, a lake, or another river, often a central feature in ecosystems and human civilizations.

Lower Reaches

The downstream part of a river close to its mouth where it meets a larger body of water.

Aquifer

An underground layer of water-bearing permeable rock, rock fractures or unconsolidated materials (gravel, sand, or silt) that can yield significant quantities of water.

Well

A deep hole drilled or dug into the ground to access water, oil, gas, or other underground resources.