If Debt Financing Is Used, Which of the Following Is

question 24

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:

Revenues

The total income generated from normal business operations and other activities like investments, calculated before any expenses are deducted.

Generally Accepted Accounting Principles

A framework of accounting standards, principles, and procedures that companies follow to compile their financial statements.

Economic Events

Any occurrences or transactions that affect the financial position of a company, including sales, purchases, and investments.

Income Tax Regulations

The rules and laws that govern how income taxes are calculated, collected, and enforced by the tax authorities.