Which of the following statements about combined (operating & financial) leverage is true?
A) Usage of both operating and financial leverage reduces a firm's risk.
B) If a firm employs both operating and financial leverage, any percent change in sales will
produce a larger percent change in earnings per share.
C) A firm that is in a capital-intensive industry should use a higher level of financial leverage
than a firm that employs low levels of operating leverage.
D) High operating leverage and high financial leverage offset one another, meaning that if sales
increase by 10%, then EPS will also increase by 10%.
B
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Assets purchased on long-term credit contracts should be recorded at the present value of the consideration exchanged.
a. true b. false
Demand risk refers to:
A) the probability that actual supply for the products or services will exceed anticipated supply. B) the probability that actual supply for the products or services will fall short of anticipated supply. C) the probability that actual demand for the products or services will exceed anticipated demand. D) the probability that actual demand for the products or services will fall short of anticipated demand.