Suppose You Are Deciding Whether to Spend Your Tax Rebate

question 15

Multiple Choice

Suppose you are deciding whether to spend your tax rebate check on a new iPod player or a new digital camera. You are dealing with the concept of

• A) equity.
• B) comparative advantage.
• C) opportunity costs.
• D) the fallacy of composition.

---

Definitions:

EBIT-EPS Line

A graphical representation showing the impact of financial leverage on a company's earnings per share at various levels of earnings before interest and taxes.

Financial Leverage

The use of borrowed funds to increase the potential return on investment, often measured by the ratio of a company's debt to its equity.

Financial Risk

The possibility of losing money on an investment or business venture; includes market risk, credit risk, liquidity risk, and operational risk, among others.

Shareholders

Individuals or entities that own shares in a corporation, granting them rights to dividends and a say in company affairs proportional to their shareholding.