If a Firm Utilizes Debt Financing,a 10% Decline in Earnings

question 80

True/False

If a firm utilizes debt financing,a 10% decline in earnings before interest and taxes (EBIT)will result in a decline in earnings per share that is larger than 10%,and the higher the debt ratio,the larger this difference will be.

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Definitions:

Pyrotechnics

The art of making or displaying fireworks, sometimes used in entertainment or celebrations.

Trumpet

A brass wind instrument with a flared bell and three buttons (valves) that is commonly used in classical and jazz music.

Pyrotechnics

The art, craft, or science of making and using fireworks or related explosive devices for entertainment, military, or industrial purposes.

Fourth of July

A U.S. holiday commemorating the Declaration of Independence of the United States, on July 4, 1776.