New World Manufacturing Has Determined That Its Degree of Financial

question 69

Multiple Choice

New World Manufacturing has determined that its degree of financial leverage (DFL) is 3.0 when sales equal $750,000, which happens to be its operating breakeven point (i.e., SOpBE = $750,000) . At sales equal to $750,000, which of the following conditions must exist for New World Manufacturing? Assume everything else is equal. 

• A)Earnings per share (EPS) = 0
• B)Earnings per share (EPS) > 0
• C)Earnings per share (EPS) < 0
• D)Earnings before interest and taxes (EBIT) > 0
• E)Total operating costs = 0

Understand the categorization of different activities (operating, investing, and financing) according to the statement of cash flows.

Comprehend the effects of specific business transactions on the statement of cash flows.

Identify how noncash transactions are reported in financial statements.

Apply the indirect method to prepare the operating activities section of the statement of cash flows.

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Definitions:

Lubrication

The application of a substance (such as oil or grease) to reduce friction and wear between two surfaces in contact.

Rehydrate

The process of restoring lost water or moisture to the body, cells, or other materials.

Cilia

Microscopic, hair-like structures on the surface of cells that move in a wave-like manner, often serving to propel substances or cells or to detect environmental stimuli.

Respiratory Tubes

Tubes that are part of the respiratory system, facilitating air movement to and from the lungs for gas exchange.