Question

What does financial leverage measured? A) No change with EBIT and EPS B) The sensibility of EBIT with % change with respect to output C) The sensibility of EPS with % change in the EBIT level D) % variation in the level of production

Answer 1

Answer:

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Answer 2

Answer:

Financial leverage measures The sensibility of EPS with % change in the EBIT level.

Explanation:

The Financial Leverage (FL) measures the connection between the EBIT and the EPS and it mirrors the impact of progress in EBIT fair and square of EPS. The FL estimates the responsiveness of the EPS to an adjustment of EBIT and is characterized as the % change in EPS separated by the % change in EBIT. Emblematically, = Increase in EPS ¸EPS/Increase in EBIT¸EBIT.

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