CFA Practice Question

There are 120 practice questions for this study session.

CFA Practice Question

In the absence of ______, a percentage change in EBIT causes the same percentage change in net income and EPS.

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
You need to log in first to add your comment.