Which of the Following Is True of Financial Leverage

question 109

Multiple Choice

Which of the following is true of financial leverage?

• A)It affects the sensitivity of net income to changes in sales.
• B)It arises from the use of debt financing.
• C)It is increased by an increase in operating leverage.
• D)a and b

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Definitions:

Draft

A preliminary version of a piece of writing, document, or legislation that is subject to further revision and editing.

Drawer

The party that writes and signs a check, directing a bank to pay the check's amount to the person or entity named as the payee.

Drawee

The party on whom a check or draft is drawn, and who is expected to pay the amount specified.

Approach-approach Conflict

A psychological dilemma that occurs when an individual must choose between two desirable options.