If Debt Financing Is Used, Which of the Following Is

question 40

Multiple Choice

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

• A) The percentage change in net operating income will be greater than a given percentage change in net income.
• B) The percentage change in net operating income will be 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 will depend on the interest rate charged on debt.
• D) The percentage change in net income will be greater than the percentage change in net operating income.
• E) The percentage change in sales will be greater than the percentage change in EBIT, which in turn will be greater than the percentage change in net income.

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Definitions:

Negotiation Strategies

Approaches used to reach an agreement or compromise between parties with different needs, interests, or objectives, often involving communication and problem-solving techniques.

Outsourcing

The business practice of hiring external vendors to perform tasks, handle operations, or provide services that are either difficult to manage or outside of the company's core competencies.

Logistics Function

The process of planning, executing, and controlling the efficient, effective forward and reverse flow and storage of goods, services, and related information between the point of origin and the point of consumption to meet customer requirements.