If a Firm Increases Its Use of Financial Leverage,then What

question 47

Multiple Choice

If a firm increases its use of financial leverage,then what would we generally expect for the effect of that increased leverage to have on the dispersion of the firm's Net Income distribution?

• A) less dispersion
• B) no effect on dispersion
• C) greater dispersion
• D) there is not enough information to determine

---

Definitions:

Standard Labor Hours

The preset amount of time that is expected to be required to complete a specific task or job under normal conditions.

Direct Labor Rate Variance

The cost associated with the difference between the actual rate and the standard rate paid for direct labor multiplied by the actual direct labor hours used in producing a commodity.

Actual Costs

The true amount of money spent on a project or activity, as opposed to estimated or budgeted costs.

Standard Costs

Standard costs are predetermined estimates of the cost to manufacture a single unit or a number of units of a product during a specific time period.