Which of the Following Statements Is Correct

question 120

Multiple Choice

Which of the following statements is correct?

• A) Suppose Company A's EPS is expected to experience a larger percentage change in response to a given percentage change in sales than Company B's EPS.Other things held constant,Company A would appear to have more business risk than Company B.
• B) Statement a would be correct if the term "EBIT" were substituted for "EPS."
• C) Statement a would be correct if the term "EBIT" were substituted for "sales."
• D) Statement a would be correct if the words "financial risk" were substituted for "business risk."
• E) The above statements are all false.

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Definitions:

Stock Issuance Costs

The expenses related to issuing new stocks, including legal, accounting, and underwriting fees.

New Shares

New shares refer to additional stocks issued by a company either through public offerings or rights issues to existing shareholders, which can dilute current ownership percentages.

Consolidated Receivables

The aggregation of all receivables or money owed by customers to a company, combined from all its divisions or subsidiaries for reporting purposes.

Par Value

The nominal or face value of a stock or bond, typically used as an accounting standard rather than reflecting market value.