The Higher the Degree of Financial Leverage (DFL), the Greater

question 167

True/False

The higher the degree of financial leverage (DFL), the greater the leverage a plan has, and the steeper its slope when plotted on EBIT-EPS axes.

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Definitions:

Free Cash Flow

The amount of cash generated by a business after accounting for operating expenses and capital expenditures, available for distribution among shareholders.

Interest Expense

The cost incurred by an entity for borrowed funds, typically stated as an annual rate.

Net Debt

A financial metric that calculates a company's total debt minus its cash and cash equivalents, assessing its leverage.

Equity Holders

Investors who own shares of stock in a company, giving them a claim on the company's assets and earnings.