The Degree of Financial Leverage Has Which of the Following

question 65

Multiple Choice

The degree of financial leverage has which of the following characteristics?

• A) The closer the firm is operating to its financial breakeven point,the smaller the DFL.
• B) Other things held constant,if a firm has fixed financial costs,such as interest,a change in EBIT will result in an equivalent change in EPS.
• C) For a particular firm,the DFL is not a fixed number⎯its value depends on the level of operations and the fixed financial costs associated with those operations.
• D) The DFL relates the change in EBIT to the change in sales.
• E) If a firm has common stock,it is impossible for its DFL to equal 1.0.

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Definitions:

Attribution

The process by which individuals explain the causes of behavior and events, attributing them to internal dispositions or external situations.

Perceptual Activities

are processes through which individuals interpret and make sense of their sensory input from the environment.

Person's Actions

The deeds or acts carried out by an individual, which may reflect their intentions, decisions, or reaction to outside forces.

Social Perception

The process of interpreting and understanding the behavior and characteristics of others in the social environment.