Which of the following measures the effect on earnings per share (EPS) of a change in operating income (earnings before interest and taxes)?
A)Operating leverage
B)Total leverage
C)Pooled leverage
D)Equity leverage
E)Financial leverage

Question

Quizplus · Accepted Answer

Financial leverage measures the effect on earnings per share of a change in operating income, taking into account the impact of interest expense on net income. Operating leverage measures the effect on operating income of a change in sales revenue. Total leverage and equity leverage are not relevant to measuring the impact on EPS of a change in operating income. Pooled leverage is not a commonly used financial term.

Which of the Following Measures the Effect on Earnings Per