The Primary Weakness of EBIT-EPS Analysis Is That

question 63

Multiple Choice

The primary weakness of EBIT-EPS analysis is that

• A) it ignores the implicit cost of debt financing.
• B) it double counts the cost of debt financing.
• C) it applies only to firms with large amounts of debt in their capital structure.
• D) it may only be used by firms that are profitable this year.

---

Definitions:

Parity Ratio

is a measurement used to compare the value of one thing against another, often in agriculture or finance.

Prices Received

The amounts of money received by producers or sellers for their goods or services in the market.

Nicotine

A toxic colorless or yellowish oily liquid that is the chief active constituent of tobacco, acting as a stimulant when consumed.