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Basic Question 3 of 5
With financial leverage, a drop in sales means that net income and EPS will ______ than they would if no debt were being used.
B. drop less
C. increase more
A. drop more
B. drop less
C. increase more
User Contributed Comments 2
| User | Comment |
|---|---|
| kalps | Financial leverage increases sensitivity of EPS to changes in sales |
| setmefree | second degree of leverage- financial leverage-->the greater, the more sensitive EPS to changes in sales/EBIT. first degree of leverage--operating leverage= %of fixed assets --> the greater, the more sensitive EBIT to changes in sales |
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Learning Outcome Statements
evaluate a company's capital investments and capital structure
CFA® 2025 Level I Curriculum, Volume 3, Module 5.