If Debt Financing Is Used, Which of the Following Is

question 11

Multiple Choice

If debt financing is used, which of the following is true?

• A) The percentage change in net operating income is greater than a given percentage change in net income.
• B) The percentage change in net operating income is equal to a given percentage change in net income.
• C) The percentage change in net income relative to the percentage change in net operating income depends on the interest rate charged on debt.
• D) The percentage change in net operating income is less than the percentage change in net income.
• E) The degree of operating leverage is greater than 1.

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Definitions:

Financial Aid

Financial assistance provided to students to help cover the cost of their education, which can come in the form of grants, scholarships, loans, and work-study programs.

Cohabitation

An arrangement in which a couple lives together in a committed romantic relationship but are not formally married.

Committed Romantic Relationship

A relationship marked by emotional and usually sexual fidelity, loyalty, and mutual support between partners.

Chronological Age

The actual age of a person measured in years from the date of birth, often used as a general indicator of development and aging.