The level of sales at which earnings per share (EPS) will be the same whether the firm uses debt or common stock financing is known as _____.
A) the optimal capital structure
B) the beta point
C) the indifference point
D) the standard deviation of EPS
E) the coefficient of variation

Question

Quizplus · Accepted Answer

The level of sales at which earnings per share (EPS) will be the same whether the firm uses debt or common stock financing is known as the indifference point. At this point, the firm is indifferent between using debt or common stock financing. Therefore, the correct answer is C. A is incorrect because the optimal capital structure refers to the mix of debt and equity that maximizes the value of the firm. B, D, and E are incorrect because they are not related to the concept of indifference point.

The Level of Sales at Which Earnings Per Share (EPS)