In a Leveraged Firm, the Variation in ROE and EPS

question 107

True/False

In a leveraged firm, the variation in ROE and EPS will always be less than the variation in the firm's EBIT because of the lower cost of capital.

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Definitions:

Board of Governors

A governing body or executive committee that oversees the policy-making, management, and proper conduct of an organization, institution, or central bank.

New York Federal Reserve

One of the 12 Federal Reserve Banks of the United States, it plays a key role in monetary policy, financial supervision, and the payment system.

Interest On Reserves

The rate paid by central banks to financial institutions on the excess reserves they hold at the central bank.

Money Supply

The complete financial assets volume in an economy at a designated point in time.