Which of the Following Is True of the Degree of Financial

Multiple Choice

Which of the following is true of the degree of financial leverage of a firm?

A) The degree of financial leverage affects the earnings before interest and taxes of the firm.
B) The degree of financial leverage is defined as the percentage change in net operating income with a given percentage change in sales.
C) A lower degree of financial leverage suggests that higher risk is associated with the firm's normal operating activities.
D) The degree of financial leverage affects the operating section of the income statement.
E) A higher degree of financial leverage suggests that higher risk is associated with the firm's mix of debt and equity financing.