Total Leverage Measures the Effect of Fixed Costs on the Relationship

question 190

Multiple Choice

Total leverage measures the effect of fixed costs on the relationship between ________.

• A) sales and EBIT
• B) sales and EPS
• C) EBIT and EPS
• D) EBIT and dividend

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Definitions:

Annual Coupon Bond

A bond that pays interest to the holder on an annual basis, typically as a fixed percentage of its face value.

Face Value

The original cost of a financial instrument as stated on the certificate or document, not influenced by the market price.

Maturity

The date on which a financial instrument, such as a bond or loan, reaches its due date and the principal amount must be repaid.

Zero-Coupon Bonds

Debt securities that don't pay periodic interest but are issued at a significant discount to par value, providing profit at maturity when they reach their face value.