Financial Leverage Affects Both EPS and EBIT, While Operating Leverage

question 28

True/False

Financial leverage affects both EPS and EBIT, while operating leverage only affects EBIT.

Understand the role of resource pricing and its significance in economics.

Analyze how firms achieve profit-maximizing equilibrium through resource allocation.

Recognize the derived nature of labor demand and its dependence on product demand.

Know the concept and importance of marginal product (MP) and marginal revenue product (MRP) in resource employment.

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Definitions:

Independent Events

Two events are independent if the outcome of one does not affect the outcome of another.

P(A|B)

The likelihood of event A happening, provided that event B has already taken place, signifying a conditional probability.

Disjoint Events

Disjoint events are two or more events that cannot occur simultaneously, indicating there is no overlap in their outcomes.

Nonzero Probabilities

This implies that events or outcomes have a likelihood greater than zero of occurring.