Which of the following is affected by financial leverage?
A) Earnings per share
B) Net operating income
C) Sales
D) Variable costs
E) Fixed costs

Question

Quizplus · Accepted Answer

Financial leverage refers to the use of debt to finance a company's operations or investments, and it can have an impact on a company's earnings per share. This is because the cost of borrowing (interest expense) is deducted from a company's net income before calculating earnings per share. As a result, a company with higher levels of debt may have lower earnings per share compared to a similar company with less debt. Net operating income, sales, variable costs, and fixed costs are not directly affected by financial leverage.

Which of the Following Is Affected by Financial Leverage