A) If sales increase 10% for both companies,then Company D will have a larger percentage increase in its net income.
B) If sales increase 10% for both companies,then Company D will have a larger percentage increase in its operating income (EBIT) .
C) If EBIT increases 10% for both companies,then Company D's net income will rise by more than 10%,while Company E's net income will rise by less than 10%.
D) Company E has a higher degree of financial leverage.
E) The two companies have the same degree of total leverage.
G) A) and C)
Correct Answer
verified
Correct Answer
verified
A) $64,189
B) $77,703
C) $67,568
D) $54,054
E) $68,243
G) A) and C)
Correct Answer
verified
Correct Answer
verified
A) An increase in fixed costs, (holding sales and variable costs constant) will reduce the company's degree of operating leverage.
B) An increase in interest expense will reduce the company's degree of financial leverage.
C) If the company has no debt outstanding,then its degree of total leverage equals its degree of operating leverage.
D) If a firm's degree of operating leverage increases,its degree of financial leverage must also have increased.
E) If the company has no debt outstanding,then its degree of total leverage equals its degree of financial leverage.
G) A) and D)
Correct Answer
verified
Correct Answer
verified
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