Which of the following statements about combined (operating and financial) lever

Question

Which of the following statements about combined (operating and financial) leverage is true?

A. If a firm employs both operating and financial leverage, any percent change in sales will produce a larger percent change in earnings per share.

B. A firm that is in a capital-intensive industry should use a higher level of financial leverage than a firm that employs low levels of operating leverage.

C. Usage of both operating and financial leverage reduces a firm's risk.

D. High operating leverage and high financial leverage offset one another, meaning that if sales increase by 10%, then EPS will also increase by 10%.

Explanation / Answer

B. A firm that is in a capital-intensive industry should use a higher level of financial leverage than a firm that employs low levels of operating leverage

Related Questions

Navigate

• Browse (All)
• Browse W
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.