After Completing an EPS/EBIT Analysis, What Conclusions Would You Make

question 92

Multiple Choice

After completing an EPS/EBIT analysis, what conclusions would you make if the debt line is above the stock line throughout the range of EBIT on the graph?

• A) Debt appears to be the best financing alternative.
• B) Stock would be the best financing alternative.
• C) A combination of debt and stock is probably the best financial alternative.
• D) Dividends must be considered before conclusions can be made.
• E) The company should be privately owned.

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Definitions:

Voltage Drop

The amount of voltage required to cause an amount of current to flow through a certain resistance.

Series RL Circuit

An electrical circuit that contains both a resistor (R) and an inductor (L) connected in series, which impacts the phase and amplitude of the circuit's response.

Inductive Reactance

The opposition offered by an inductor to the flow of alternating current in a circuit, quantified in ohms.

Apparent Power

The total power within an electrical circuit, represented in VA (volt-amperes), which combines both real power and reactive power.