A High Degree of Financial Leverage Means That a Small

question 134

Multiple Choice

A high degree of financial leverage means that a small change in sales will result in:

• A) a small change in earnings per share
• B) a large change in earnings per share
• C) no change in earnings per share
• D) always a negative change in earnings per share

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Definitions:

Production Possibility Frontier

A curve depicting all maximum output possibilities for two or more goods given a set of inputs (resources, technology, etc.), assuming all resources are fully and efficiently utilized.

Labor Force

The total number of people who are employed and those actively seeking employment in an economy.

Bowed Out

A term used to describe the shape of a production possibilities frontier that demonstrates increasing opportunity costs.

Resources

This term refers to assets, materials, and components that can be used to produce goods and services.