If Variables Change in the Opposite Direction, What Type of Correlation

question 12

Multiple Choice

If variables change in the opposite direction, what type of correlation is this called?

• A) Positive correlation
• B) Negative correlation
• C) Positive causation
• D) Negative causation

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Definitions:

Optimal Capital Structure

The combination of debt and equity that minimizes a company's cost of capital and maximizes its value.

Debt

Debt is an amount of money borrowed by one party from another, typically involving repayment of the principal amount along with interest.

Operating Leverage

A metric assessing the impact of increased sales on operational earnings, revealing the balance between a firm's fixed and variable expenses.

EBIT

Earnings Before Interest and Taxes, a measure of a company's profitability that excludes interest and income tax expenses to show the business's core profitability.