If Debt Financing Is Used, Which of the Following Is

question 55

Multiple Choice

If debt financing is used, which of the following is CORRECT?

• A) The percentage change in net operating income will be equal to a given percentage change in net income.
• B) The percentage change in net income relative to the percentage change in net operating income will depend on the interest rate charged on debt.
• C) The percentage change in net income will be greater than the percentage change in net operating income.
• D) The percentage change in sales will be greater than the percentage change in EBIT, which in turn will be greater than the percentage change in net income.
• E) The percentage change in net operating income will be greater than a given percentage change in net income.

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Definitions:

Consumer-Driven Health Plan

A type of health insurance plan that places more control and decision-making in the hands of the consumer, typically involving high deductibles and health savings accounts.

Defined-Contribution Plan

A retirement plan where the amount of the employer's annual contribution is specified, and the future benefits fluctuate based on investment performance.

Profit-Sharing

A system where a portion of a company's profits is distributed to its employees, typically as a form of incentive or bonus.

Pension Benefit Guarantee Corporation

A U.S. government agency that protects the retirement incomes of American workers by insuring defined-benefit pension plans.