A Firm That Uses Large Amounts of Debt Financing in an Industry

question 79

Multiple Choice

A firm that uses large amounts of debt financing in an industry characterized by a high degree of business risk would have ________ earnings per share fluctuations resulting from changes in levels of sales.

• A) no
• B) constant
• C) large
• D) small

---

Definitions:

Lack-of-participation Error

A mistake or oversight that occurs when not all relevant parties are involved in a decision-making process, leading to potential biases or incomplete information.

Escalation Error

Escalation Error refers to the phenomenon where individuals or groups continue to invest in a decision despite new evidence suggesting it may be wrong, often due to sunk costs or ego.

Decision-making Process

A series of steps undertaken by individuals or organizations to select the best course of action among several alternatives.

Evaluate Results

The process of analyzing outcomes to determine the effectiveness of actions taken and to inform future decisions.