A Decrease in the Level of a Firm's Interest Expense

question 186

Multiple Choice

A decrease in the level of a firm's interest expense (holding all other factors constant) would:

• A)increase operating leverage.
• B)decrease operating leverage.
• C)decrease financial leverage.
• D)have no impact on operating leverage.
• E)c and d

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Definitions:

Standard Deviation

A statistical measure that quantifies the amount of variation or dispersion of a set of data values around the mean.

Capital Cost Allowance (CCA)

A tax deduction in certain jurisdictions for depreciation of property used in a business or for earning income.

Operating Cash Flow

The cash an organization generates from its normal business operations, indicating its ability to generate sufficient positive cash flow to maintain and grow its operations.

Interest Expense

Cost incurred by an entity for borrowed funds, which may include payments on loans, bonds, and lines of credit.