When Using an EPS-EBIT Chart to Evaluate a Pure Debt

question 94

Multiple Choice

When using an EPS-EBIT chart to evaluate a pure debt financing and pure equity financing plan,

• A) the debt financing plan line will graph with a steeper slope than the equity financing plan line.
• B) the debt financing plan line will have a lower level of EBIT at EPS = 0.
• C) the line of the two financing plans will intersect on the EBIT axis.
• D) the slope of the equity financing plan line will be steeper than the debt financing plan line below the intersection of the two lines.

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Definitions:

Unrealistically Low Expectations

Expectations that are set significantly below a realistic assessment of achievable outcomes, often leading to underperformance or missed opportunities.

Psychological Contract Breach

The perception that an employer has failed to fulfill one or more unwritten expectations of the employment relationship.

Unrealistically High

Describes expectations or objectives that are excessively beyond realistic reach or achievement.

Psychological Contract Breach

A perception that one's employer has failed to fulfill one or more obligations within the unwritten agreement of the psychological contract.