Interest expense creates magnification of earnings through financial leverage because:
A) the interest rate is variable.
B) interest accompanies debt financing.
C) the use of interest causes higher earnings.
D) interest costs are cheaper than the required rate of return to equity owners.
E) while earnings available to pay interest rise,earnings to residual owners rise faster.
Correct Answer:
Verified
Q2: The price/earnings ratio:
A)measures the past earning ability
Q3: Using financial leverage is a good financial
Q4: Book value per share may not approximate
Q5: Smith reported the following for 2012.
Q6: The best dividend payout ratio:
A)approximates 50%.
B)continues at
Q7: The following data were gathered from
Q8: A firm has a degree of financial
Q9: Which of the following ratios usually reflects
Q10: The ratio percentage of earnings retained is
Q11: A summarized income statement for Leveraged
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