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problem1: A high degree of variability in a firm's earnings before interest and taxes refers to ______.

[A] financial leverage

[B] operating leverage

[C] business risk

[D] financial risk

problem2: Operating leverage refers to ________.

[A] The incurrence of fixed operating costs in the firm's income stream

[B] A high degree of variable costs of production

[C] Financing a portion of the firm's assets with securities bearing a fixed rate of return

[D] The additional chance of insolvency borne by the common shareholder

problem3: Ames Drilling Corp. reported that its sales and EBIT increased by 10%, but its EPS increased by 30%. The much larger change in earnings per share could be the result of ____.

[A] a high percentage of credit sale collections from prior years

[B] high fixed costs of production

[C] high operating leverage

[D] high financial leverage

problem4: A plant may remain operating when sales are depressed ____.

[A] in an effort to cover at least some of the variable cost

[B] unless variable costs are zero when production is zero

[C] if the selling price per unit exceeds the variable cost per unit

[D] to help the local economy

Basic Finance, Finance

  • Category:- Basic Finance
  • Reference No.:- M919462

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