Through the Effects of Financial Leverage, When EBIT Increases, Earnings

question 3

Multiple Choice

Through the effects of financial leverage, when EBIT increases, earnings per share will

• A) decrease.
• B) remain unchanged.
• C) increase.
• D) change in an undetermined direction.

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Definitions:

Market Sector

A segment of the economy into which large groups of businesses and companies can be categorized based on their business activities.

Deadweight Losses

The loss of economic efficiency that can occur when equilibrium for a good or service is not achieved.

Economic Growth

An increase in the production of goods and services in an economy over a period of time, typically measured as a percentage increase in real GDP.

Income Transfers

Transfers of money from one group to another not in exchange for goods or services, typically through government programs aimed at redistributing wealth.