Financial leverage talks about how the increase in the debt leads to increase in the fixed interest/financial costs and its affect on EBIT and EPS
Hence, option C is correct
1 pts Question 3 costs on the leverage measures the effect of fixed relationship between EBIT...
18. Combined leverage is concerned with the relationship between changes in EBIT and changes in EPS. changes in volume and changes in EPS. changes in volume and changes in EBIT. changes in EBIT and changes in net income.
Which of the following is true about the concept of leverage? O A. at the breakeven point, operating leverage is equal to zero. O B. combined leverage measures the impact of operating and financial leverage on EBIT. O C. financial leverage measures the impact of fixed costs on earnings. OD. none of the above Reset Selection
Chapter 3 – Question 3 The relationship between financial leverage and profitability Pelican Paper, Inc., and Timberland Forest, Inc., are rivals in the manufacture of craft papers. Some financial statement values for each company follow. Item Pelican Paper, Inc. Timberland Forest, Inc. Total assets $10,600,000 $10,600,000 Total equity (all common) 9,900,000 5,100,000 Total debt 700,000 5,500,000 Annual interest 70,000 550,000 Total sales 24,000,000 24,000,000 EBIT 6,000,000 6,000,000 Earnings...
b-1. What is the EBIT/TA rate when the firm's have equal EPS? EBIT/TA rate b-2. What is the cost of debt? Cost of debt b-3. State the relationship between earnings per share and the level of EBIT. EPS is unaffected by financial leverage when the pre-tax return on assets (EBIT/TA) the cost of debt. c. If the cost of debt went up to 12 percent and all other factors remained equal, what would be the break-even level for EBIT? Break-even...
Operating leverage is a.the difference between sales and variable expense. b.the use of fixed costs to extract higher percentage changes in profits as sales activity changes. c.the portion of each sales dollar available to cover fixed costs and provide for profit. d.visually portrays the relationship between profits and units sold. e.none of these
Through the effects of financial leverage, when EBIT increases, O earnings per share will decrease O earnings per share will increase O fixed operating costs will decrease O fixed operating costs will increase
Question 17 1 pts A researcher measures the relationship between narcissism and willingness to help. If SSxy = 132, SSy = 260, and SSY = 520, then what is the value of the correlation coefficient? 0.72 0.65 0.36 0.003
How can I determine current DOL (degree of operating leverage), DFL (degree of financial leverage), and DCL (degree of combined leverage)? If maximization of earning per share is the goal, what is the indifference EBIT (EBIT*)? Also, Once the expansion is completed, the sales are expected to increase to $5,000,000. How can I calculate the new EBIT. At the new EBIT which method of financing results in a higher EPS? Calculate EPS for both plans at this new EBIT. new...
Degree of operating leverage Grey Products has fixed operating costs of $389,000, variable operating costs of $16.19 per unit, and a selling price of $63.43 per unit. a. Calculate the operating breakeven point in units. b. Calculate the firm's EBIT at 10,000, 12,000, and 14,000 units, respectively. c. With 12,000 units as a base, what are the percentage changes in units sold and EBIT as sales move from the base to the other sales levels used in part (b)? d....
Degree of operating leverage Grey Products has fixed operating costs of $373,000, variable operating costs of $16.55 per unit, and a selling price of $63.45 per unit. a. Calculate the operating breakeven point in units. b. Calculate the firm's EBIT at 11,000, 13,000, and 15,000 units, respectively. c. With 13,000 units as a base, what are the percentage changes in units sold and EBIT as sales move from the base to the other sales levels used in part (b)? d....