Which of the Following Statements Is Correct

question 145

Multiple Choice

Which of the following statements is correct?

• A) The degree of combined leverage measures the sensitivity of earnings per share into changes in EBIT.
• B) A firm's business risk is measured by its variability in earnings per share over time.
• C) A firm's degree of combined leverage is the product of its degree of operating leverage and its degree of financial leverage.
• D) Total leverage does not consider financial leverage.

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Definitions:

Incentive System

A structured plan designed to motivate and encourage specific behaviors or actions among a group of people or employees.

Profit Sharing

A form of compensation whereby a percentage of company profits is distributed to the employees whose work helped generate them.