How Will Increases in the Following Items Affect Residual Income $\begin{array} { l c c } & \text { Increase in Sales } & \text { Increase in Equipment } \\\end{array}$

question 136

Multiple Choice

How will increases in the following items affect residual income?
$\begin{array} { l c c } & \text { Increase in Sales } & \text { Increase in Equipment } \\\end{array}$
A) $\begin{array} { l c c } & \text { Decrease RI } &&& \text { Decrease RI } \\\end{array}$
B) $\begin{array} { l c c } & \text { Decrease RI } &&& \text { Increase RI } \\\end{array}$
C) $\begin{array} { l c c } & \text { Increase RI } &&& \text { Decrease RI } \\\end{array}$
D) $\begin{array} { l c c } & \text { Increase RI } &&& \text { Increase RI } \\\end{array}$

• A) \(\begin{array} { l c c } & \text { Decrease RI } &&& \text { Decrease RI } \\\end{array}\)
• B) \(\begin{array} { l c c } & \text { Decrease RI } &&& \text { Increase RI } \\\end{array}\)
• C) \(\begin{array} { l c c } & \text { Increase RI } &&& \text { Decrease RI } \\\end{array}\)
• D) \(\begin{array} { l c c } & \text { Increase RI } &&& \text { Increase RI } \\\end{array}\)
• A) Option A
• B) Option B
• C) Option C
• D) Option D

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Definitions:

EBIT

Earnings Before Interest and Taxes represents a company's profit, encompassing all revenues and costs apart from interest and taxes.

EPS

Earnings per share. A firm’s earnings stated on a per-share outstanding basis. An important measure of business performance in the stock market.

Equity

Ownership interest in a company, represented by shares that entitle holders to a share of the company's profits.

Financial Leverage

The use of borrowed money to multiply financial performance in terms of ROE and EPS.