Because the Degree of Total Leverage Is Multiplicative and Not

question 215

Multiple Choice

Because the degree of total leverage is multiplicative and not additive, when a firm has very high operating leverage it can moderate its total risk by

• A) increasing sales.
• B) using more financial leverage.
• C) increasing EBIT.
• D) using a lower level of financial leverage.

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Definitions:

Abnormal Behavior

Actions or behaviors that deviate significantly from what is considered typical or normal within a society or cultural context.

Exorcism

The practice, common in early societies, of treating abnormality by coaxing evil spirits to leave the person’s body.

Demonology

The study of demons or beliefs about demons, often within the context of religion, mythology, or the occult.

Middle Ages

A period in European history from the 5th to the late 15th century, marked by feudalism, the spread of Christianity, and the rule of the Holy Roman Empire.