The Degree of Financial Leverage Is Measured by Relating the Percentage

question 145

Multiple Choice

The degree of financial leverage is measured by relating the percentage change in earnings per share to the percentage change in:

• A)sales.
• B)EBIT.
• C)debt ratio.
• D)share price.

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Definitions:

Bondholders

Individuals or entities that hold debt securities issued by corporations or governments, entitling them to receive fixed interest payments.

Share Price Maximization

The goal of increasing the value of a company's stock to benefit its shareholders.

Quality Goods

Products that meet or exceed customer expectations in terms of durability, reliability, and performance.

Weighted Average Cost of Capital (WACC)

A measure that reflects the average rate of return a company is expected to pay its security holders to finance its assets.