What Does a Degree of Financial Leverage (DFL) of 2

question 38

Multiple Choice

What does a degree of financial leverage (DFL) of 2.0 indicate?

• A)For every 1 percent change in its sales, the firm's EBIT will change by 2 percent.
• B)For every 1 percent change in its EPS, the firm's sales will change by 0.5 percent.
• C)For every 1 percent change in its EBIT, the firm's EPS will change by 2 percent.
• D)For every 1 percent change in its EPS, the firm's EBIT will change by 0.5 percent.
• E)For every 1 percent change in its EBIT, the firm's sales will change by 2 percent.

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