When a Firm Employs No Debt

question 60

Multiple Choice

When a firm employs no debt

• A) it has a financial leverage of one.
• B) it has a financial leverage of zero.
• C) its operating leverage is equal to its financial leverage.
• D) it will not be profitable.

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Definitions:

Principle Of Exceptions

A management principle emphasizing attention and resources on areas that deviate from the norm or expected results.

Standard Costs

Predetermined costs for products or services used to measure against actual costs for performance management and budgeting.

Actual Costs

The real expenses incurred during a specific period, as opposed to budgeted or estimated costs.

Cost Variance

The difference between the actual cost incurred and the standard or budgeted cost, used in budgeting and financial analysis.