Which of the Following Statements About Combined (Operating & Financial)leverage

question 56

Multiple Choice

Which of the following statements about combined (operating & financial) leverage is true?

• A) If a firm employs both operating and financial leverage, any percent change in sales will produce a larger percent change in earnings per share.
• B) A firm that is in a capital-intensive industry should use a higher level of financial leverage than a firm that employs low levels of operating leverage.
• C) Usage of both operating and financial leverage reduces a firm's risk.
• D) High operating leverage and high financial leverage offset one another, meaning that if sales increase by 10%, then EPS will also increase by 10%.