Financial Leverage Is a Direct Function of the Ratio Of

question 103

Multiple Choice

Financial leverage is a direct function of the ratio of:

• A)net income to sales.
• B)EBIT to sales.
• C)interest expense to EBIT.
• D)net income to the number of shares of common stock.

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Definitions:

Administrative Expense

Costs associated with the general administration of a business, including salaries of senior executives, legal and financial fees, and other general expenses.

Fixed Cost

Overheads that are not affected by the volume of production or sales, covering rent, employee salaries, and insurance fees.

Ending Inventory

Ending inventory refers to the final value of goods available for sale at the end of an accounting period.

Lawn Chairs

Portable chairs designed for use outdoors, particularly in lawns, gardens, or for leisure activities.