Other factors being constant, higher fixed financial costs mean:
A) higher financial leverage
B) higher operating leverage
C) lower combined leverage
D) the degree of financial leverage is equal to 1.0

Question

Quizplus · Accepted Answer

Higher fixed financial costs lead to higher financial leverage, as the company is relying more on debt financing to cover these costs. This means that a small change in sales can result in a larger change in earnings, both positively and negatively.

Other Factors Being Constant, Higher Fixed Financial Costs Mean