_________is the potential use of fixed financial charges to magnify the effects of changes in earningsbefore interest and taxes on the firm's earnings per share.
A) Operating leverage
B) Financial leverage
C) Total leverage
D) Debt service

Question

Quizplus · Accepted Answer

The potential use of fixed financial charges to magnify the effects of changes in earnings before interest and taxes on the firm's earnings per share is called financial leverage. Financial leverage refers to the use of fixed-cost financing, such as debt, preferred shares, or lease payments, to increase the potential return on equity. This can result in magnified gains for shareholders when earnings are positive, but can also lead to magnified losses when earnings are negative.

_________Is the Potential Use of Fixed Financial Charges to Magnify