- CFA Exams
- CFA Level I Exam
- Topic 3. Corporate Issuers
- Learning Module 6. Capital Structure
- Subject 2. Factors Affecting Capital Structure
CFA Practice Question
In the absence of ______, a percentage change in EBIT causes the same percentage change in net income and EPS.
B. fixed operating expenses
C. operating leverage
A. financial leverage
B. fixed operating expenses
C. operating leverage
Correct Answer: A
If there is no financial leverage in the capital structure, then any given percentage change in EBIT will result in the same percentage change in net income and EPS.
User Contributed Comments 1
| User | Comment |
|---|---|
| setmefree | when there's no interest expense, EBIT*(1-t) = net income = EPS * number of outstanding shares |