The Use of Leverage by a Firm

question 40

Multiple Choice

The use of leverage by a firm

• A)increases the variability of EBIT.
• B)replaces all use of homemade leverage.
• C)increases shareholder risk.
• D)affects EBIT more than net income.
• E)increases EPS at low levels of income.

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Definitions:

Intensity

The degree of strength, force, or concentration of an activity, emotion, or property.

Spillover Effect

The phenomenon where an occurrence in one context or part of a system spreads to other parts, influencing them in some way.

Two-Factor Theory

A model that explains emotions as a result of physiological arousal and cognitive labeling of that arousal.

Low-Road Pathway

A neural pathway that processes sensory information related to threats and emotions more rapidly than the cognitive processing pathways, often bypassing conscious thought.