If a Firm Has a DFL of 2

question 66

True/False

If a firm has a DFL of 2.0, EPS will change 2% for every 1% change in volume.

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Definitions:

Retained Earnings

Profits that a company keeps after dividends are paid, often reinvested into the business or used to pay off debt.

Preferred Stock

A type of stock that gives its holders preference over common stockholders in terms of dividends and claims on assets during liquidation.

Treasury Stock

Treasury stock is made up of shares that have been issued and subsequently bought back by the company that issued them, which decreases the number of shares available on the open market.

Common Stock

A type of equity security that represents ownership in a corporation, providing voting rights and a share in the company's profits through dividends.