With Financial Leverage, a Change in EBIT Results in a Change

question 14

Multiple Choice

With financial leverage, a change in EBIT results in a change in ____.

• A) fixed costs
• B) EPS
• C) financial risk
• D) EBT

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Definitions:

Opportunity Cost

is the value of the next best alternative forgone as a result of making a particular choice, highlighting the trade-offs in decision-making.

Absolute Advantage

The ability of a country or individual to produce a good or service more efficiently than others, using fewer resources.

Terms Of Trade

How much of one good exchanges for a unit of another good.

Comparative Advantage

The ability of a country or entity to produce a particular good or service at a lower opportunity cost than others, leading to more efficient international trade.