If Debt Financing Is Used,which of the Following Is Correct

question 75

Multiple Choice

If debt financing is used,which of the following is correct?

• A)The percentage change in sales will be greater than the percentage change in EBIT, which in turn will be greater than the percentage change in net income.
• B)The percentage change in net operating income will be equal to a given percentage change in net income.
• C)The percentage change in net income relative to the percentage change in net operating income will depend on the interest rate charged on debt.
• D)The percentage change in net income will be greater than the percentage change in net operating income.

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Definitions:

Team Size

Refers to the number of members in a team, which can affect its dynamics, communication, and overall effectiveness.

Diminishing Returns

An economic principle stating that as investment in a particular area increases, the rate of profit from that investment, after a certain point, cannot continue to increase if other variables remain at a constant.

Team Context

The specific environment or situation in which a team operates, including its goals, structures, and dynamics.

Internal Functioning

Relates to the operations and processes that occur within an organization or system, affecting its overall performance and health.