The Effect of fiNancial Leverage Depends on the Operating Earnings

question 53

Multiple Choice

The effect of financial leverage depends on the operating earnings of the company.Which of the following is not true?

• A)Below the indifference or break-even point in EBIT the non-levered structure is superior.
• B)Financial leverage increases the slope of the EPS line.
• C)Above the indifference or break-even point the increase in EPS for all equity plans is less than debt-equity
• Plans.
• D)Above the indifference or break-even point the increase in EPS for all equity plans is greater than debt-
• Equity plans.
• E)The rate of return on operating assets is unaffected by leverage.

---

Definitions:

Descriptive Sentences

Phrases that provide detailed information or paint a vivid picture of a subject for the reader.

Written Request

A formal or informal communication method involving sending a question, petition, or requirement through written means.

Buffer Statements

Sentences used in communication to ease into a difficult message, reducing potential shock or discomfort.

Main Idea

The central concept or primary point that an author or speaker is trying to communicate.