The Degree of Financial Leverage Measures the Sensitivity of Earnings

question 6

True/False

The degree of financial leverage measures the sensitivity of earnings per share to sales.

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Definitions:

Debit Column

A column in accounting ledgers and financial statements used to record increases in asset or expense accounts, and decreases in liability, equity, or revenue accounts.

Credit Column

A column in accounting records or financial statements used to record amounts that reduce balances in asset or expense accounts, or increase balances in liability, equity, or revenue accounts.

Financial Statement

A written record that conveys the financial activities and conditions of a business or individual.

Normal Balance

The side (debit or credit) of an account that increases its value, reflecting the conventional balance based on accounting rules.