Financial Leverage Is Distinct from Operating Leverage Since It Accounts

question 135

Multiple Choice

Financial leverage is distinct from operating leverage since it accounts for

• A) use of debt and preferred stock.
• B) variability in fixed operating costs.
• C) variability in sales.
• D) changes in EBIT.

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Definitions:

Loan

Borrowed capital which is due to be paid back with interest.

Payments

Transactions made to fulfill obligations, such as bills, loans, or purchases.

Balance

The amount of money held in a financial account, calculated as the funds deposited minus any withdrawals or expenditures.

Compounded Monthly

A method where interest is calculated and added to the principal sum every month, leading to interest on interest.