Which of the following statements is true?
A) A graph of the relationship between EPS and EBIT is steeper when the firm is leveraged.
B) At the indifference point on an EPS-EBIT graph, two financing alternatives provide the same EBIT.
C) Firms are more likely to use greater levels of debt when predicted EBIT is low.
D) In EPS-EBIT analysis, EPS is considered a poor proxy for firm value.
E) None of the above.

Question

Quizplus · Accepted Answer

Increasing financial leverage improves returns when times are good, but increases losses when times are bad.

Which of the Following Statements Is True