Which One of the Following Statements Is Correct Concerning the Relationship

question 24

Multiple Choice

Which one of the following statements is correct concerning the relationship between a capital structure with debt and one without debt? Assume there are no taxes.

• A) When a firm is operating at a point where the actual earnings before interest and taxes (EBIT) exceed the break-even level, then adding debt to the capital structure will increase the earnings per share (EPS).
• B) The earnings per share will equal zero when EBIT is zero for a levered firm.
• C) The advantages of leverage primarily occur when EBIT is just barely positive.
• D) The firm's EPS will always be higher if the firm uses leverage.
• E) EPS are more sensitive to changes in EBIT when a firm is unlevered.

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Definitions:

Omni-channel Strategy

A multi-channel approach to sales that seeks to provide customers with a seamless shopping experience, whether they are shopping online from a mobile device, a laptop, or in a brick-and-mortar store.

Go To Market Strategy

A plan that outlines how a company will introduce its products or services to the market effectively.

Labor-intensive Industries

Sectors or businesses that require a large amount of labor to produce goods or services, as opposed to being heavily automated or equipment-oriented.

Availability

The extent to which a product or service is obtainable and ready for use by customers.