If Debt Financing Is Used, Which of the Following Is

question 25

Multiple Choice

If debt financing is used, which of the following is CORRECT?

• A) the percentage change in net operating income will be equal to a given percentage change in net income.
• B) the percentage change in net income relative to the percentage change in net operating income will depend on the interest rate charged on debt.
• C) the percentage change in net income will be greater than the percentage change in net operating income.
• D) the percentage change in sales will be greater than the percentage change in ebit, which in turn will be greater than the percentage change in net income.
• E) the percentage change in net operating income will be greater than a given percentage change in net income.

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Definitions:

Copper

A reddish-brown metal with high electrical and thermal conductivity, widely used in electrical wiring and in alloying.

Ionic Balance

The state of equilibrium in a system where the total charge of ions is balanced, crucial for various biological processes.

Sodium

A chemical element, symbol Na, that is a highly reactive metal and an essential component in the bodies of animals, important for nerve impulse transmission and fluid balance.

Chlorine

A chemical element with symbol Cl and atomic number 17, known for its disinfecting properties and used in the production of a wide array of products.