If a Firm Has No Operating Leverage and No Financial

question 34

Multiple Choice

If a firm has no operating leverage and no financial leverage,then a 10% increase in sales will have what effect on EPS?

• A) EPS will remain the same.
• B) EPS will increase by 10%.
• C) EPS will decrease by 10%.
• D) EPS will increase by less than 10%.

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Definitions:

Final Settlement

The resolution and closure of a financial transaction, including the final transfer of funds or assets between parties.

Profits and Losses

Financial terms referring to the income earned and the expenses incurred by a business during a period, impacting the overall financial health.

Personally Insolvent

A financial condition where an individual is unable to pay their debts as they become due.

Capital Accounts

Financial records that track the contributions to and distributions from owners or shareholders of a company, reflecting changes in ownership equity over time.