Financial Leverage

question 66

Multiple Choice

Financial leverage:

• A)increases as the net working capital increases.
• B)is equal to the market value of a firm divided by the firm's book value.
• C)is inversely related to the level of debt.
• D)is the ratio of a firm's revenues to its fixed expenses.
• E)increases the potential return to the stockholders.

---

Definitions:

Operating Leverage

A measure of how sensitive a company's operating income is to changes in sales volume, indicating the degree of fixed versus variable costs.

Percentage Change

A mathematical calculation that depicts the degree of change over time, usually expressed as a percentage.

Break-Even

The point at which total costs and total revenue are equal, meaning there is no net loss or gain, and one has "broken even."

Monthly

Pertaining to or calculated for a period of one month.