Suppose That a Firm Has a Degree of Financial Leverage

question 31

Multiple Choice

Suppose that a firm has a degree of financial leverage (DFL) that is greater than 1.0; that is, DFL > 1. If the firm's sales decrease by 1 percent, its ______ will decrease by more than 1 percent. 

• A)earnings per share (EPS)
• B)net operating income (NOI)
• C)interest expense
• D)variable costs
• E)fixed financing costs

---

Definitions:

Simplify

The process of making something less complicated or easier to understand, often applied in mathematical expressions or complex ideas.

GST Rate

GST Rate refers to the tax rate applied to the sale of goods and services within a country.

Property

A physical or intangible asset owned by an individual or corporation.

Market Exposure

The amount of funds invested in a particular market sector or investment, representing the level of risk taken.