Which of the Following Statements Is True

question 54

Multiple Choice

Which of the following statements is true?

• A) A graph of the relationship between EPS and EBIT is steeper when the firm is leveraged.
• B) At the indifference point on an EPS-EBIT graph, two financing alternatives provide the same EBIT.
• C) Firms are more likely to use greater levels of debt when predicted EBIT is low.
• D) In EPS-EBIT analysis, EPS is considered a poor proxy for firm value.
• E) None of the above.

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Definitions:

Price Discrimination

A pricing strategy where a business charges different prices to different customers for the same product or service, based on what the seller believes the customer is willing to pay.

Producer

An individual or organization that creates goods or services to sell to consumers.

Price Discrimination

The strategy of selling the same product or service at different prices to different groups of consumers, typically based on willingness to pay.

Deadweight Loss

A loss in economic efficiency that occurs when the equilibrium output is not achieved or when supply and demand are out of balance.