Examlex

Solved

Which of the Following Mathematical Expressions Is Used to Compute

question 65

Multiple Choice

Which of the following mathematical expressions is used to compute the degree of financial leverage at a particular level of earnings before interest and tax (EBIT) ? Assume that the preferred stockholders receive no dividends.


Definitions:

Market Value

The going rate for an asset or service available for exchange in the open market.

Equity

The value of an asset after deducting the value of liabilities, representing ownership interest in a company or property.

Cost of Capital

The rate of return that a company must earn on its project investments to maintain its market value and attract funds.

Debt/Equity Ratio

A fiscal ratio that reflects the comparative amount of equity from shareholders and borrowed funds utilized to support a company's resources.

Related Questions