Lombardo Company Had Net Income of $70,000 and Interest Expense

question 165

Multiple Choice

Lombardo Company had net income of $70,000 and interest expense of $10,000. If the corporate tax rate was 30%, determine its Degree of Financial Leverage (DFL) .

• A) 1.30
• B) 1.25
• C) 1.20
• D) 1.15
• E) 1.10

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Definitions:

Degrees of Freedom

The count of autonomous variables or numbers that can be linked to a statistical distribution.

Standard Deviations

Measures of the amount of variation or dispersion of a set of values, indicating how spread out the values are from the mean.

Population Variances

A measure of the dispersion of a population data set, representing the average of the squared differences from the Population Mean.

Test Statistic

A value calculated from sample data during a hypothesis test, used to determine the likelihood of a hypothesis being true.