One way of measuring the advantage of financial leverage to the owners of the company is ________.
A)to examine the earnings per share (EPS)of a company before borrowing from debt lenders
B)to examine the earnings per share (EPS)of a company after borrowing from debt lenders
C)to examine the dividends per share (DPS)of a company before and after borrowing from debt lenders
D)to examine the earnings per share (EPS)of a company before and after borrowing from debt lenders

Question

Quizplus · Accepted Answer

Examining the EPS before and after borrowing from debt lenders is the best way to measure the advantage of financial leverage to the owners of the company. This is because financial leverage amplifies the returns on investment, and comparing the EPS before and after borrowing can demonstrate this. A higher EPS after borrowing indicates that financial leverage is beneficial to the owners, while a lower EPS after borrowing may indicate that financial leverage is not advantageous or that it has been misused.

One Way of Measuring the Advantage of Financial Leverage to the Owners