Other things held constant,if a firm operates at a profit and sales increase,the degree of financial leverage will decline.

Question

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When sales increase, assuming costs and the capital structure remain constant, the firm's earnings before interest and taxes (EBIT) will increase. This reduces the degree of financial leverage because the firm is less reliant on fixed financial obligations (like interest payments) relative to its earnings, leading to a lower financial risk.

Other Things Held Constant,if a Firm Operates at a Profit