Which of the Following Statements Concerning a Firm's Degree of Financial

Multiple Choice

Which of the following statements concerning a firm's degree of financial leverage (DFL) is correct?

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