Exam 5: Operating and Financial Leverage

If the business cycle were just beginning its upswing, which firm would you anticipate would be likely to show the best growth in EPS over the next year? Firm A has high combined leverage and Firm B has low combined leverage.

(Multiple Choice)

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Question 101

Managers who are risk averse and uncertain about the future would most likely minimize combined leverage.

(True/False)

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Question 102

-The Degree of Operating Leverage is:

(Multiple Choice)

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Question 103

Operating leverage primarily affects the left hand side of the balance sheet while financial leverage affects the right hand side of the balance sheet.

(True/False)

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Question 104

The combined leverage is the result of the reduction in earnings from fixed costs and from amortization expense.

(True/False)

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Question 105

If the price per unit increases but the cost structure remains the same:

(Multiple Choice)

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Question 106

Showing 101 - 106 of 106

If the business cycle were just beginning its upswing, which firm would you anticipate would be likely to show the best growth in EPS over the next year? Firm A has high combined leverage and Firm B has low combined leverage.

Managers who are risk averse and uncertain about the future would most likely minimize combined leverage.

-The Degree of Operating Leverage is:

Operating leverage primarily affects the left hand side of the balance sheet while financial leverage affects the right hand side of the balance sheet.

The combined leverage is the result of the reduction in earnings from fixed costs and from amortization expense.

If the price per unit increases but the cost structure remains the same:

The Goals and Functions of Financial Management

Review of Accounting

Financial Analysis

Financial Forecasting

Working Capital and the Financing Decision

Current Asset Management

Sources of Short-Term Financing

The Time Value of Money

Valuation and Rates of Return

Cost of Capital

The Capital Budgeting Decision

Risk and Capital Budgeting

Capital Markets

Investment Underwriting

Long-Term Debt and Lease Financing

Common and Preferred Stock Financing

Dividend Policy and Retained Earnings

Derivative Securities

External Growth Through Mergers

International Financial Management

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