According to an EPS-operating income graph,debt financing is the preferred outcome in the case when expected operating income is:
A)less than the break-even income.
B)greater than the break-even income.
C)equal to the break-even income.
D)not able to be determined.

Question

Quizplus · Accepted Answer

Debt financing is preferred when expected operating income is greater than the break-even income because it can lead to higher earnings per share (EPS) due to the tax shield on interest payments and the leverage effect.

According to an EPS-Operating Income Graph,debt Financing Is the Preferred