The variability in a firm's EPS is affected by:
A)variability in its sales.
B)operating leverage.
C)financial leverage.
D)a and c
E)All of the above

Question

Quizplus · Accepted Answer

Variability in a firm's EPS is affected by its sales, operating leverage, and financial leverage. Changes in sales directly affect the firm's level of profitability and ultimately impact its EPS. Operating leverage refers to the degree to which fixed costs are used in a firm's operations, which can amplify the impact of changes in sales on profits and EPS. Financial leverage refers to the use of debt financing, which can also impact EPS by altering the cost of capital and the amount of interest expense that must be paid. All three factors can have a significant impact on a firm's EPS, making choice E the best answer.

The Variability in a Firm's EPS Is Affected By