In the EBIT-EPS Approach to Capital Structure, Risk Is Represented

question 111

Multiple Choice

In the EBIT-EPS approach to capital structure, risk is represented by ________.

• A) the slope of the capital market line
• B) shifts in the cost of debt capital
• C) the slope of the capital structure line
• D) shifts in the times-interest-earned ratio

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Definitions:

Sufficient Condition

A condition that, if satisfied, guarantees the occurrence or truth of another condition but isn't necessarily required for the latter's occurrence.

Method of Difference

A scientific research method used to identify the cause-effect relationship between variables by changing one variable at a time while keeping others constant.

Causal Factor

An element or condition that brings about or contributes to producing a particular outcome or effect.

Method of Concomitant Variations

A principle in scientific and philosophic reasoning that suggests a causal relationship between two variables if they vary together consistently.