After Completing an EPS/EBIT Analysis, What Conclusions Would You Make

question 92

Multiple Choice

After completing an EPS/EBIT analysis, what conclusions would you make if the debt line is above the stock line throughout the range of EBIT on the graph?

• A) Debt appears to be the best financing alternative.
• B) Stock would be the best financing alternative.
• C) A combination of debt and stock is probably the best financial alternative.
• D) Dividends must be considered before conclusions can be made.
• E) The company should be privately owned.

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Definitions:

Personal Assets

Assets owned by an individual, including property, cash, and investments, that are not associated with any business activities.

Total Liabilities

The sum of all financial obligations or debts that a company has incurred and is responsible for repaying.

Owner's Equity

The residual interest in the assets of a company after deducting liabilities, representing the ownership stake of the company's shareholders or owner.

Total Assets

The sum of all resources owned by a company, valued in monetary terms, and reported on the balance sheet.