Which of the Following Is Not True About Leverage

question 85

Multiple Choice

Which of the following is not true about leverage?

• A) Operating leverage influences the top half of the income statement, determining EBIT.
• B) Financial leverage deals with the bottom half of the income statement, determining EPS.
• C) Combined leverage utilizes the entire income statement, showing the impact of change in volume on EBIT.
• D) None of the options

---

Definitions:

Dividend Growth Rate

The annualized percentage rate of growth of a company's dividend payments to shareholders.

Plowing Back

The reinvestment of earnings by a company back into its business rather than distributing them as dividends to shareholders.

Risk-Free Rate

The risk-free rate is the theoretical rate of return of an investment with zero risk, often represented by the yield on government bonds.

Market Portfolio

A theoretical bundle of investments that includes every type of asset available in the market, with each asset weighted by its market capitalization.